Insider trading is such a vague concept that the SEC cannot win | December 2011 Cartoon by Ed Stein; source & courtesy – usagold.com
ffectively Rajat Gupta and Rajarathnam are the only people who have been convicted by US courts – based on the prosecution launched by Preet Bharara.
Travails With Yummrika
Rajat Gupta is an Indian – and Rajarathnam is a Indian by proxy. There is the less known case of Ramesh Chakrapani, who was arrested, his career ruined – and let off with no sentence, and a sword hanging of a possible future prosecution over his head.
The case against Rajat Gupta was especially flimsy.
If we go by value of ill-gotten gains, the cases against Ivan Boesky and Michael Milliken were far more grave. After benefiting to the tune of hundreds of millions in ill-gotten gains, Boesky and Milliken got away with minor jail terms.
The other element on which we can judge the seriousness of the insider-trading is to see it by the criticality of information. People like David Loeb, from the same Goldman Sachs or David Skol, from Warren Buffett‘s stable. Or see the case of Brothers Wyly (Samuel and Charles Wyly). The SEC quietly dropped charges against 3-company investment consortium (of Coudree Capital Gestion SA, Chartwell Asset Management Services, Compania Internacional Financiera SA) in the Lonza-Arch case.
These and many more cases show a SEC that is blatantly blind, random and ineffective in its persecution – except when it comes to Indians, and other immi-grunts.
The latest is the case where the beneficiary and instructor, hedge fund manager Steven Cohen is not being prosecuted, but his employee Mathew Martoma, 38, is being prosecuted for probably following his employer’s diktats and directions.
US law-makers enjoy legal immunity; leading to rampant insider trading | Insider Traders in Congress-By RJ Matson, Roll Call; 16 November, 2011
From Yummrika did the usual running down of India and Indians.
No debate, analysis on the case or the rising tide of disproportionate convictions and sentencing against Bharatiya-Americans?
Not a whit!
David Sokol’s escape from an insider-trading probe further fogs an already hazy law. Warren Buffett’s fallen heir-apparent was a prime investigation target for buying $10 million of Lubrizol shares shortly before Berkshire Hathaway acquired the company for $9 billion.
Yet, Sokol’s lawyer says the US Securities and Exchange Commission (SEC) dropped the matter. Even with a broad insider-trading crackdown since the affair was disclosed almost two years ago, the crime’s contours remain elusive.
It’s illegal to trade on material, non-public information in breach of some duty. At least based on what was disclosed publicly, that would seem to be exactly what Sokol did. He bought Lubrizol stock a day after bankers pitched the company as a possible Berkshire takeover target. He sold those shares and then bought more after he was informed by bankers that Lubrizol’s chief executive would raise Buffett’s interest at a meeting of the lubricant maker’s board.
Sokol’s inside information may not, however, have been material. He couldn’t be sure Berkshire would offer to acquire the company when he purchased the shares. It’s also unclear whether he necessarily breached a legal duty of trust.
These weaknesses could be what persuaded the SEC to drop the case, though it’s hard to know for sure. The agency isn’t saying. What is clear is that the evidence wasn’t as strong as in, say, the prosecution of Rajat Gupta, the former McKinsey boss and Goldman Sachs director. Sokol’s situation did, however, come off as similar to another insider-trading case the SEC has opted to pursue, against billionaire brothers Samuel and Charles Wyly.
On balance, the regulator may have saved some face by not pursuing Sokol if it wasn’t sure it could win. After embarrassing losses like last year’s acquittal of Citigroup employee Brian Stoker on securities fraud charges, the watchdog is probably wary of being too aggressive.
Despite scores of recent insider-trading convictions, many since the Lubrizol trades came to light, it’s still unclear what is and isn’t allowed. The bitter taste that lingers from the Sokol affair is that insider trading isn’t always what it seems.
via Sokol haze.