The WSJ occasionally buries huge stories in its much less read weekend edition; recall the option backdating investigation in 2006.

This past weekend was a classic example of this:

“Federal authorities, capping a three-year investigation, are preparing insider-trading charges that could ensnare consultants, investment bankers, hedge-fund and mutual-fund traders, and analysts across the nation, according to people familiar with the matter.

The criminal and civil probes, which authorities say could eclipse the impact on the financial industry of any previous such investigation, are examining whether multiple insider-trading rings reaped illegal profits totaling tens of millions of dollars, the people say. Some charges could be brought before year-end, they say.

The investigations, if they bear fruit, have the potential to expose a culture of pervasive insider trading in U.S. financial markets, including new ways non-public information is passed to traders through experts tied to specific industries or companies, federal authorities say.”

The criminal investigation was examining how nonpublic information was being passed to traders by consultants. These people work for companies that provide “expert network” services to hedge funds.

• Primary Global Research LLC, a Mountain View, California, firm
• Goldman Sachs Group Inc. bankers
• Broadband Research LLC in Portland, Ore

There is a laundry list of potential targets for SEC violations. Trading firms possibly under investigation include SAC, First New York Securities, Wellington, MFS, Janus,  Citadel, Ziff Brothers, Jana, TPG-Axon, Jennison, UBS and Deutsche Bank.

Companies whose stock trading were under review include Schering-Plough (before its takeover by Merck), MedImmune’s takeover by AstraZeneca, Abbott Laboratories take over of Advanced Medical Optics.

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Source:
U.S. in Vast Insider Trading Probe
SUSAN PULLIAM, MICHAEL ROTHFELD,JENNY STRASBURG and GREGORY ZUCKERMAN
WSJ, NOVEMBER 20, 2010
http://online.wsj.com/article/SB10001424052748704170404575624831742191288.html

Category: Analysts, Legal, M&A

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10 Responses to “WSJ: Expert Networks = Insider Trading”

  1. dead hobo says:

    Seriously, could this be a defense …

    “We only did it because others were doing it out in the open, We did it for years and started a long time ago, the Feds knew about it from the start, if it was against the law then the Feds ignored the law, and obviously didn’t care until now.”

  2. curbyourrisk says:

    Small fine…slap on the wrist…no admission of guilt. Isn’t that how this ALWAYS works?

    When I see orange jumpsuits walking past my window then I will believe it. The truth is out there….BUT NO ONE REALLY WANTS TO FIND IT.

  3. I suspect we are going to see criminal indictments on this one…

  4. Lugnut says:

    What curbyourisk said. Rather than letting these guys pleas and filling the coffers of the government via fines (which I view as mere post facto licensing fees to steal), how about someone do some time for a change.

  5. “I suspect we are going to see criminal indictments on this one…”

    BR,

    though, if convicted, are they going to be matriculating at Gray Bar U., or enjoying a Siesta at ‘Club Fed’ ?

  6. b_thunder says:

    Anyone still wonders why Mom & Pop investors have been pulling money out of the stock market almost every week for the entire year?
    Hey, Ben Bernanke! Do you hear me, you bearded pu*z? You can send truckloads of cash from Liberty St to the corner of Wall & Broad, and small investors still won’t return! And won’t “feel” any wealthier. At this point, even 20 hedge fund managers in handcuffs won’t help – it will only serve as another confirmations of the corrupt system.
    A hedge fund manager here, Bernie Madoff there, Enron a decade earlier… They’re not “just a few bad apples,” that much is clear. The whole system needs to be uprooted and the punishments needs to be outsourced, as everything else, to the Chinese!

  7. rip says:

    @BR: Sorry. Same ole same ole.

    Indictments? In your dreams.

    It’s Bananamerica we’re talking about here. The best backwater country money can buy.

  8. wslh says:

    Can we say: “It’s inside trading stupid!” ?

  9. Long term says:

    i would love to see the ROI of paying folks lots of money to get inside info that be correct. i don’t doubt that you would make more money this way but you would have to weigh in extra cost of the info, the extra stress of skirting the law, etc. plus, it would be increasingly expensive to pay for info about many firms rather than just catch a big market upswing–and get out.

  10. ewmayer says:

    “Tens of millions”? Excuse me while I spew coffee out my nose. Sorry, “tens of millions” is what a handful of juicy insider tips to hedge funds gets you. Gosh, if I didn`t know better, I`d think the WSJ had some kind of agenda with respect to making as light as possible of the rampant culture of fraud in the financial industry. (They`ve been doing similarly relentless soft-peddling w.r.to the ever-growing dog-ate-my-mortgage-paperwork/securitization/foreclosure-fraud scandal).