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clients that London betrayed could attempt to claw back millions of dollars in fees they paid KPMG for its now-withdrawn audits, according to CFO Journal.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.