SEC Charges Over-Anxious Business Week Readers
Word came down earlier this week that the SEC has issued charges against individuals involved in what the SEC described as "widespread and brazen schemes of serial insider trading that yielded at least $6.7 million of illicit gains." Two former Goldman Sachs employees allegedly orchestrated the schemes.
As part of one of the alleged schemes, the former Goldman Sachs employees recruited an individual and assisted him in getting a job at a printing plant that prints Business Week magazine, for the sole purpose of stealing copies of upcoming editions of the magazine. According to the complaint, the individual that was recruited used phony names as references on his application and listed cell-phone numbers belonging to the former Goldman Sachs employees. The former Goldman Sachs employees were actually called and provided what must have been glowing recommendations. After getting a job at the printing plant, the individual allegedly began reading pre-publication copies of Business Week's "Inside Wall Street" column over the telephone to the former Goldman Sachs employees, who then used the information to rake in more than $345,000 in trading gains. Accordingly to the complaint, the scheme continued even after the printing plant fired the individual, because the individual continued entering the plant in his uniform to obtain pre-publication copies of the magazine. The former Goldman Sachs employees later found another individual to assist them by allegedly placing an ad in Milwaukee newspapers.
On the one hand, such revelations make one wonder where people come up with these schemes? On the other hand, however, perhaps the former Goldman Sachs employees were not as imaginative as first impressions might suggest, as many different variations of this scheme of "trading on tomorrow's news" have been orchestrated and attempted before. In fact, in the mid-1980s, former Wall Street Journal reporter R. Foster Winans spent seven months in a minimum-security prison for trading on pre-publication information that was to appear in the Wall Street Journal. Winans' highly publicized case was actually appealed all the way to the Second Circuit Court of Appeals, which affirmed his conviction in U.S. v. Carpenter, 791 F.2d 1024 (2d Cir. 1986).
