whtie collar

Insider Trading In IBM Stock Was Wrong, but That Lexus Was So, So Right

"Dude ... Martha Stewart spent five months in the slammer."
bharara preet headshot Insider Trading In IBM Stock Was Wrong, but That Lexus Was So, So Right

Bharara.

Sometimes it just feels so right to be wrong. Sometimes, the lure of easy money is too much for a good man to resist, and the thrill alone of carrying off an illicit scheme is reward enough for the risks involved.

Or something along those lines.

Take the case of David J. Weishaus and Thomas C. Conradt, former stockbrokers charged with insider trading by U.S. Attorney Preet Bharara today. According to the indictment, in 2009 Mssrs. Weishaus and Conradt got wind—from a friend of a friend who was working on the deal—that IBM was getting ready to buy a maker of data modeling software called SPSS Inc. at a substantial premium.

Well, that little tidbit was worth something, and the pair—along with three unnamed co-conspirators—began eying the stock price of the smaller company.

While the indictment doesn’t name the company that employed the two schemers, they appear to have worked for Euro Pacific Capital at the time of the alleged insider trading, per Finra’s BrokerCheck (They also appear to have been partners in a Baltimore bar called The Den.)

And you know, as licensed financial professionals, they probably ought to have known that it’s illegal to trade on nonpublic information.  At any rate, they knew the potential consequences: In an instant message chat reproduced in the charging documents, Mr. Weishaus cautioned his buddy about the potential consequences of trading on the inside dope—only to fall victim to the lure of oh, so easy money:

weishaus Insider Trading In IBM Stock Was Wrong, but That Lexus Was So, So Right

And so the pair allegedly accumulated shares and options in SPSS, cleverly referring to the company as “horse” just in case any government types came across their written communications. (On or about July 23,  according to the indictment, Mr. Weishaus wrote to Mr. Conradt, “dude, horsey is moving … horsey can run! … come horsey, come on horsey!!! RUUUUUNNN!!!!!” Sharp as a tack, Mr. Conradt responded, “what’s going on with the horse? going up?”)

When IBM announced its deal for SPSS on July 28, the stock surged 41 percent in a single day, and the conspirators cashed out their positions: Mr. Weishaus netted more than $129,000, enough to buy a Lexus, though there’s nothing in the documents to indicated he consummated his desire for luxury Japanese automobiles.

Even if he had, it’s unlikely that he’d have enjoyed a new car for long. By October 2010, the Securities and Exchange Commission was investigating the group’s SPSS transaction, leading eventually to his arrest today. Mr. Conradt, who along with his partner, faces up to seven years in prison, didn’t even get to enjoy a brief joy ride: His alleged profits from the scheme were just more than $2,500.

 

 

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