Insider Trading Roundup: Ex-MLB Player Indicted on Fraud Charges, Former Brokers Indicted in Scam Involving IBM Acquisition, & Health Care Company Execs. Charged Over Alleged Tippee Ring

MLB player Douglas DeCinces has been indicted by a federal grand jury
In California with 42 counts of securities fraud (including insider trading and tender offering fraud charges) related to the 2009 acquisition by Abbott Laboratories (ABT) of Advanced Medical Optics Inc. His friends Fred Scott Jackson, David Parker, and Roger Wittenbach have also been charged.

DeCinces is accused of made about $1.3 million from a tip that Advanced Medical Optics Inc. was thinking about letting Abbott Laboratories acquire it. Prosecutors say that the tip came from an Advanced Medical executive and DeCinces purchased nearly 100 shares of that company and sold it after the tender was announced. He also allegedly told his three friends, who traded the stock and made about $690,000 combined.

In another alleged insider trading scam, a grand jury in New York has indicted two ex-stockbrokers on securities fraud and conspiracy charges involving tips related to the acquisition of software manufacturer SPSS Inc. by IBM Corp. (IBM). The brokers are David Weishaus and Thomas Conradt.

The inside information is said to have come from a lawyer on IBM’s legal team during the deal, which took place in 2009. The attorney allegedly told a friend, who then told Conradt. Both that friend and Conradt then allegedly bought SPSS shares, as did Weishaus after Conradt told him about it. The two of them also allegedly tipped other colleagues.

Communication about the scam is said to have occurred via instant messaging. After the acquisition was announced, the participants allegedly made over $1 million.

Criminal charges against Conradt and Weishaus include conspiracy to commit securities fraud and securities fraud. They also face SEC civil charges.

In two other securities cases, one civil and one criminal, charges have been filed against three health-care company officials and their colleagues and friends that are accused of making over $1.7 million in kickbacks and illegal profits by trading on insider information related to technology and drug companies. The defendants in the Justice Department case are Celegene Corp. (CELG) financial official John Lazorchak, Sanofi (SNY) finance officer Mark Cupo, Stryker Corp. (SYK) marketing official Mark Foldy, Cuop friend Michael Castelli, Michael Pendolino, and Lawrence Grum. All six of them and James Deprado are named in the SEC fraud lawsuit.

According to the commission, Lazorchak, Cupo, and Foldy gave the others tips about their companies so that they could engage in insider trading. The defendants allegedly tried to avoid detection by making sure there was no direct contact between the traders and the insiders. One person would be designated to act as the non-trading middle person, who would get the tip from the insider and notify the others. Cash payments would then be made to the insiders as compensation. Grum and Castelli, who were allegedly the main traders, are also accused of by putting together binders of research activity as a “false basis” for trades that they made in an effort to hide their illegal conduct.

SEC CHARGES RING OF HIGH SCHOOL BUDDIES WITH INSIDER TRADING IN HEALTH CARE STOCKS, SEC, November 19, 2012

Ex-Orioles Player DeCinces Charged With Insider Trading, Bloomberg, November 29, 2012

SEC v. Conradt & Weishaus (PDF)

More Blog Posts:
Insider Trading Roundup: SEC Settlement Reached Over Alleged Tips In Insurers’ Merger, Court Won’t Throw Out Criminal Charges Related to Info From AA Member, & Asset Freeze Approved Against Broker In Burger King Acquisition, Stockbroker Fraud Blog, September 28, 2012

Texas Securities Case: Mark Cuban Asks District Court To Reconsider Compelling the SEC to Produce Documents Related to Insider Trading Allegations Over Mamma.com Stock Offering, Stockbroker Fraud Blog, June 19, 2012

Insider Trading: Former FrontPoint Partners Hedge Fund Manager Pleads Guilty to Criminal Charges, Institutional Investor Securities Blog, August 20, 2012

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