Insider Trading Continues Unabated Despite the Feds’ Focus

What do the Feds have to do to send a loud and clear message that insider trading is a serious crime with “hard-time” penalties if you are caught?

Despite sending Raj and Gupta to the big house, the Feds’ message of deterrence has still not reached Wall Street and Corporate America. Insider trading is rampant, with confidential information being shared in boardrooms and on golf courses.

The latest scandal involves KMPG, one of the remaining big four accounting firms. It shocked investors last week with a report that partner Scott London allegedly gave illegal tips on at least a dozen stocks to his golfing buddy who in return slipped him $50,000 in cash.

London allegedly called his buddy, jewelry designer Bryan Shaw, two or three days before a company’s financial results were to be released and read him a draft of the news release. Shaw pocketed at least $1.2 million in illegal profits by trading on the insider information.

Should the Feds think of having caddies on major golf courses now wear wires?

According to an article by David Hall, Editor of CFO Journal, London offered up information on KPMG clients Herbalife, Skechers, Deckers Outdoor, RSC Holdings and Pacific Capital Bancorp. KPMG could face civil action from audit regulators and former clients, according to Michael Rapoport of the Wall Street Journal. The company’s clients that London betrayed could attempt to claw back millions of dollars in fees they paid KPMG for its now-withdrawn audits, according to CFO Journal.

KPMG is planning to take legal action against Mr. London, who could face up to five years in prison and up to $250,000 in fines if he’s convicted of conspiracy to commit securities fraud, according to CFO Journal.

How do we end this scourge, which erodes investor confidence? Or is the game so rigged that the Feds can only stop it at the margins?

The Feds must work tirelessly to protect investors, and creating stiffer penalties for the likes of Scott London would be a big help. Why not double or triple the jail time for the insider traders such as Scott London? That would get the attention of the crooked executives who seem to populate so many corporate boardrooms today. The Feds must create stiffer penalties to force these corporate blabbermouths to shut up.

Disclosure: Zamansky & Associates (www.zamansky.com) are securities fraud lawyers representing investors in FINRA arbitrations and federal and state litigation against financial institutions.
About Jacob H. Zamansky 58 Articles

Jacob (”Jake”) H. Zamansky is one of the country’s foremost authorities on securities arbitration law, the legal recourse for investors claiming broker wrongdoing, or for brokers claiming wrongful termination or other misconduct by their employer. Zamansky & Associates, the New York-based law firm he founded, represents both individuals and institutions in complex securities, hedge fund, and employment arbitrations.

Mr. Zamansky was at the forefront of recent efforts to “clean up” Wall Street. In 2001, he successfully sued former Merrill Lynch analyst Henry Blodget on behalf of a New York pediatrician misled by Blodget’s stock research. The case’s successful resolution was the catalyst for New York Attorney General Elliot Spitzer to investigate the conflicts of interest on Wall Street and resulted in the well-reported $1.4 billion Global Settlement, which included many of the biggest names on Wall Street.

More recently, Mr. Zamansky is one of the leading litigators and opinion leaders of the subprime mortgage crisis and the related hedge fund collapses, representing both investors and mortgage borrowers who were defrauded by Wall Street firms and mortgage lenders. Among Mr. Zamansky’s early actions is filing the first arbitration case on behalf of institutional and high net worth investors against Bear Stearns Asset Management with regard to the two hedge funds which collapsed as a result of exposure to subprime mortgage backed securities. He also has filed claims on behalf of individual investors victimized by brokers that steered their portfolios into unsuitable subprime stocks and mortgage borrowers who were fraudulently coerced into inappropriate mortgage and investment transactions.

Earlier in his career, Mr. Zamansky worked for more than 30 years as a litigator, including positions at Skadden Arps, Slate, Meagher and Flom LLP. His tenure also included serving as a federal prosecutor with the Federal Trade Commission.

A native of Philadelphia, Mr. Zamansky has been a frequent expert commentator on CNBC, CNN, and FOX News and has published opinion pieces in The Wall Street Journal, Financial Times and USA Today. He is regularly quoted and his cases have been chronicled in major financial and news publications including The New York Times, USA Today, The Washington Post, BusinessWeek, Fortune and Forbes. He is a frequent lecturer for industry and legal groups around the country. He also writes a blog that can be viewed here.

Visit: Zamansky & Associates

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