Two more men have been charged in the United States over a ring of information-sharing involving a Kiwi lawyer that led to illegal trading in a technology company acquired by IBM for US$1.2 billion ($1.4 billion) in 2009.
On Wednesday, Benjamin Durant, 37, was charged with two counts of securities fraud and one count of conspiracy, while Daryl Payton, 38, was charged with three securities fraud counts and one conspiracy count. They made a profit of more than US$290,000 using the information, the US Securities and Exchange Commission said.
Both were arrested during the morning, and later pleaded not guilty in Manhattan federal court. Their lawyers declined to comment following the arraignment.
Three people have already admitted to sharing and trading on secret information provided by the corporate lawyer working on IBM's purchase of software maker SPSS in 2009.
The lawyer, who has not been charged, was identified in a related US Securities and Exchange Commission lawsuit on Wednesday as New Zealander Michael Dallas, a former associate at the New York law firm Cravath, Swaine & Moore.
A Cravath spokeswoman did not immediately respond to a request for comment, nor did an employer listed for Dallas on his LinkedIn page. Dallas could not immediately be reached.
Authorities said Dallas was under pressure and shared information about the SPSS deal during a lunch with his close Australian friend Trent Martin, an analyst at Royal Bank of Scotland. Martin then told his roommate Thomas Conradt, who worked at Euro Pacific Capital of Westport, Connecticut.
Dallas, who studied at Victoria University in Wellington, never traded on or revealed confidential information confided in him by Martin, the SEC said.
"At that lunch, Dallas's assignment to the SPSS Acquisition was a topic of discussion between the two men, and Dallas sought from Martin moral support, reassurance, and advice with respect to his new assignment.
"Dallas confided in Martin his concern as to his lack of experience, attempting to communicate to Martin the magnitude and importance of the assignment.
"In so doing, Dallas revealed to Martin nonpublic information about the SPSS Acquisition, including the anticipated transaction price and the identities of the acquiring and target companies."
Based on their history of sharing and maintaining confidences, Dallas expected Martin to maintain the information confidential, the SEC said.
CO-OPERATING WITH INVESTIGATION
Prosecutors said Conradt and a trading colleague, David Weishaus, bought call options on SPSS before IBM's bid was announced, and Conradt tipped Durant and Payton.
Martin, Conradt and Weishaus pleaded guilty last year to charges related to the trades, and agreed to co-operate in the investigation.
Payton and Durant were also working for Euro Pacific at the time of the trading, according to public records kept by the Financial Industry Regulatory Authority.
FINRA records show they left Euro Pacific at the same time the SEC informed the firm it was investigating them for options trades they made. The firm is not named in the indictment, which describes it as "Securities Trading Firm-1."
Andrew Schiff, director of marketing at Euro Pacific, said the firm co-operated in the investigation and has terminated employees who were implicated. He said the firm has received no indication from the SEC or FINRA that it might be a target.
According to the indictment, Durant said he had heard about SPSS while researching investment opportunities on Fidelity.com, while Payton claimed to hear about the stock from Durant.
The men then refused to answer further questions about the trades and were fired, the indictment said.
The indictment also cited an unnamed co-conspirator at Euro Capital who also bought options based on the inside information, resulting in a profit of US$44,250. That person's identity could not be immediately determined.
- Emily Flitter and Nate Raymond