Financial Integrity

Former Goldman Sachs Director Faces New Insider Trading Charges

Prosecutors have added an additional charge of insider trading to their prosecution of Rajat Gupta, former director at both Goldman Sachs and Proctor & Gamble. In a letter to the court made public earlier this week, the government accused Gupta of leaking Proctor & Gamble’s quarterly organic sales growth forecast to Raj Rajaratnam ahead of the company’s public announcement. With the additional charge against Gupta levied this week, the government has now accused the business executive with giving Rajaratnam five separate illegal tips. Unlike their prosecution of Rajaratnam, who was convicted of insider trading last May, the government does not have direct evidence of insider trading such as recorded phone conversations to use against Gupta. Instead they will be using circumstantial evidence like phone bills and trading records, to build their case.

New York Times: Ex-Goldman Director Faces New Insider Trading Claim (16 April 2012)
(Source: New York Times)

Former Summit Hedge Fund Chief Jailed for Insider Trading

Former Clay Capital Management chief investment manager and portfolio manager James Turner has been sentenced to one year in prison for insider trading, and has been fined US$25,000. Reportedly, Mr Turner “on several instances traded on insider information passed to him from his brother-in-law, Scott Vollmar, and a friend and former college classmate, Scott Robarge”. In early 2008, after receiving a tip from Mr Vollmar, Mr Turner “traded on the tip in his personal accounts, his family members’ accounts and his hedge fund’s account”, reports The insider trading scheme reportedly resulted in profits of almost US$4 million between at least four people, according to the US Securities and Exchange Commission. Ex-Summit hedge fund chief sentence to prison for insider trading (17 April 2012)

Chief of Brazilian Bank Fined for Insider Trading

Brazilian bank PTG Pactual’s chief executive officer André Esteves has been fined €350,000 (approximately US$457,000) for insider trading by the Italian financial regulator Consob. The insider trading reportedly involved Mr Esteves allegedly accessing “privileged information to buy shares in Italian meat processor Cremonini in 2007 shortly before the company disclosed plans to form a joint venture with rival JBS of Brazil”, allowing him to profit from the subsequent rise in the price of Cremonini’s shares. Mr Esteves has denied having any access to privileged information and intends to appeal the fine, reports Financial News.

Financial News: Italy fines bank CEO ahead of Brazilian IPO (17 April 2012 – subscriber access only)

Related news item:
New York Times: BTG Pactual Chief Fined Over Insider Trading (16 April 2012)
(Source: Financial News; New York Times)

UK Regulator’s Statistics Reveal More Share Fraud But Less Loss
Europe, Middle East and Africa

The UK Financial Services Authority (FSA) has announced that according to its statistics, share fraud rose by 19% in 2011, however, fewer people were conned into investing with the fraudsters, with a 7% drop in investors. According to the FSA, this percentage “represents a significant amount of money that could have been saved” because the average loss suffered by investors is around £20,000.

FSA’s media release (17 April 2012)
(Source: FSA)

Citigroup Shareholders Chastise CEO’s Pay Package

55% of Citigroup’s shareholders have strongly opposed a plan “which laid out compensation for the bank’s top five executives”, including its chief executive officer (CEO) Vikram Pandit, who was set to receive US$15 million. The vote is reportedly not binding but retiring chairperson Richard Parsons said that the Citigroup board “will carefully consider it”. According Credit Agricole Securities analyst Mike Mayo, “Citigroup has had the worst stock price performance among large banks over the last decade but ranked among the highest in terms of compensation for top executives”, reports the NY Times. Florida State Board of Administration senior officer Mike McCauley has reportedly opined that “[t]he plan put forth reveals a disconnect between pay and performance”. Citigroup has reportedly come to the defence of the package, stating that its net income went up 4% from 2010 to 2011 “and that it paid back the federal government billions in bailout loans and deferred cash awards to ‘limit incentives to take imprudent or excessive risks’”.

NY Times: Citigroup’s Chief Rebuffed on Pay by Shareholders (17 April 2012)
(Source: NY Times)