Two charged with insider trading over 2009 IBM deal

NEW YORK Fri Nov 30, 2012 5:01am IST

The IBM logo is seen outside the company's offices in Petah Tikva, near Tel Aviv October 24, 2011. REUTERS/Nir Elias/Files

The IBM logo is seen outside the company's offices in Petah Tikva, near Tel Aviv October 24, 2011.

Credit: Reuters/Nir Elias/Files

Related Topics

Stocks

   

NEW YORK (Reuters) - Two former stock brokers at a Connecticut financial services company were charged with insider trading on Thursday over a 2009 acquisition by computer giant IBM Corp (IBM.N).

U.S. authorities said Thomas Conradt, David Weishaus and three unnamed colleagues made more than $1 million in illicit gains by trading in shares of SPSS Inc before IBM agreed on July 28, 2009, to buy the Chicago-based software company for $1.2 billion.

Prosecutors said the alleged scheme started with a tip from an associate at the New York law firm that represented IBM in the transaction. Prosecutors did not name the law firm, but regulatory documents listed Cravath Swaine & Moore as counsel to IBM in the deal.

"Thomas Conradt, David Weishaus and their co-conspirators engaged in a chain of illegal tipping simply because they wanted to get rich quick," U.S. Attorney Preet Bharara in Manhattan said in a statement.

Conradt, 34, is a lawyer living in Denver, while Weishaus, 32, lives in Baltimore. Both were formerly employed at Euro Pacific Capital Inc, a Westport, Connecticut-based firm, according to the Financial Industry Regulatory Authority.

Sharon Feldman, a lawyer for Conradt, did not immediately respond to a request for comment. Michael Grudberg, a lawyer for Weishaus, declined to comment.

Evan Chesler, presiding partner of Cravath, declined comment. IBM and Euro Pacific Capital did not immediately respond to requests for comment.

Conradt and Weishaus were arrested on Thursday morning, an FBI spokesman said. Each was charged with three counts of securities fraud and one count of conspiracy in an indictment unsealed in U.S. District Court in Manhattan.

If convicted, they face up to 20 years in prison and a $5 million fine on each of the securities fraud counts.

The U.S. Securities and Exchange Commission filed related civil fraud charges against both men.

KEEPING IT IN THE FAMILY

IBM agreed to pay $50 per share for SPSS, a 42 percent premium to SPSS' closing price on the day before the purchase was announced.

According to court papers, Conradt's roommate, an Australian equities analyst, had learned about the pending acquisition from a close friend, a New Zealand citizen who worked as an associate at the New York law firm.

Investigators said Conradt then tipped Weishaus, who in turn tipped three colleagues, who were not named in court papers. These five people placed the various improper trades in SPSS stock and options, according to the court papers.

The indictment outlines a series of instant messages involving the defendants that prosecutors said reflect their involvement in the improper trades.

In one exchange, according to the indictment, Conradt on July 1, 2009, told Weishaus, "jesus, don't tell anyone else ... we gotta keep this in the family".

Weishaus then said, "i dont want to go to jail," and said "martha stewart spent 5 months in the slammer," referring to the homemaking doyenne, who was convicted in 2004 on charges of lying to investigators about a stock sale. He also alluded to an SEC insider-trading case against Mark Cuban, the billionaire owner of the Dallas Mavericks pro basketball team.

The criminal case is U.S. v. Conradt et al, U.S. District Court, Southern District of New York, No. 12-cr-00887. The SEC case is SEC v. Conradt et al in the same court, No. 12-08676.

(Additional reporting by Liana B. Baker, Basil Katz and Nate Raymond; editing by John Wallace and Andrew Hay)

FILED UNDER:
Comments (0)
This discussion is now closed. We welcome comments on our articles for a limited period after their publication.

  • Most Popular
  • Most Shared

Wipro Results

People walk in the Wipro campus in Bangalore June 23, 2009. REUTERS/Punit Paranjpe/Files

Wipro sees rosier end to year as U.S. clients spend

India's third-biggest software services firm Wipro Ltd , under pressure to improve lacklustre sales growth, said it saw a rosier end to the year as more confident U.S. clients increase spending.  Full Article 

Reuters Showcase

New Email Service

New Email Service

Google launches new email service dubbed "Inbox".  Full Article 

Cyber Attack

Cyber Attack

China-backed hackers may have infiltrated Apple's iCloud - blog.  Full Article 

User Data Security

User Data Security

Apple CEO discusses security with top Chinese official amid hacking claims - Xinhua.  Full Article 

Patent Wars

Patent Wars

Big Tech winning battle with 'patent trolls'.  Full Article 

Record Season

Record Season

FedEx expects record peak volume of 22.6 million packages on Dec. 15.  Full Article 

Yahoo Earnings

Yahoo Earnings

Yahoo ekes out Q3 revenue gain despite display ad weakness.  Full Article 

Reuters India Mobile

Reuters India Mobile

Get the latest news on the go. Visit Reuters India on your mobile device.  Full Coverage