Two former stock brokers at a Connecticut financial services company
were charged with insider trading on Thursday over a 2009 acquisition by
computer giant IBM Corp.
U.S. authorities said Thomas Conradt, David
Weishaus and three unnamed colleagues made more than $1 million in
illicit gains by trading in shares of SPSS Inc before IBM agreed on July
28, 2009, to buy the Chicago-based software company for $1.2 billion.
said the alleged scheme started with a tip from an associate at the New
York law firm that represented IBM in the transaction. Prosecutors did
not name the law firm, but regulatory documents listed Cravath Swaine
& Moore as counsel to IBM in the deal.
"Thomas Conradt, David
Weishaus and their co-conspirators engaged in a chain of illegal tipping
simply because they wanted to get rich quick," U.S. Attorney Preet
Bharara in Manhattan said in a statement.
Conradt, 34, is a lawyer
living in Denver, while Weishaus, 32, lives in Baltimore. Both were
formerly employed at Euro Pacific Capital Inc, a Westport,
Connecticut-based firm, according to the Financial Industry Regulatory
Sharon Feldman, a lawyer for Conradt, did not
immediately respond to a request for comment. Michael Grudberg, a lawyer
for Weishaus, declined to comment.
Evan Chesler, presiding
partner of Cravath, declined comment. IBM and Euro Pacific Capital did
not immediately respond to requests for comment.
Weishaus were arrested on Thursday morning, an FBI spokesman said. Each
was charged with three counts of securities fraud and one count of
conspiracy in an indictment unsealed in U.S. District Court in
If convicted, they face up to 20 years in prison and a $5 million fine on each of the securities fraud counts.
The U.S. Securities and Exchange Commission filed related civil fraud charges against both men.
Keeping it in the family
agreed to pay $50 per share for SPSS, a 42 percent premium to SPSS'
closing price on the day before the purchase was announced.
to court papers, Conradt's roommate, an Australian equities analyst,
had learned about the pending acquisition from a close friend, a New
Zealand citizen who worked as an associate at the New York law firm.
said Conradt then tipped Weishaus, who in turn tipped three colleagues,
who were not named in court papers. These five people placed the
various improper trades in SPSS stock and options, according to the
The indictment outlines a series of instant messages
involving the defendants that prosecutors said reflect their
involvement in the improper trades.
In one exchange, according to
the indictment, Conradt on July 1, 2009, told Weishaus, "jesus, don't
tell anyone else we gotta keep this in the family".
then said, "i dont want to go to jail," and said "martha stewart spent 5
months in the slammer," referring to the homemaking doyenne, who was
convicted in 2004 on charges of lying to investigators about a stock
sale. He also alluded to an SEC insider-trading case against Mark Cuban,
the billionaire owner of the Dallas Mavericks pro basketball team.
criminal case is U.S. v. Conradt et al, U.S. District Court, Southern
District of New York, No. 12-cr-00887. The SEC case is SEC v. Conradt et
al in the same court, No. 12-08676.
© Thomson Reuters 2012