[LONDON] A former Deutsche Bank AG managing director and another man were found guilty of insider dealing following a four-month trial that focused on allegations that bankers at respected institutions gave traders tips that generated millions in illicit profits.
Martyn Dodgson, a former corporate broker at the lender, and accountant Andrew Hind were convicted by majority verdict in London Monday in what is considered the country's biggest insider-trading case. Three other men were cleared following nine days of deliberations.
The UK Financial Conduct Authority, which brought the case, said Dodgson and another corporate broker gave information about deals to Hind, who passed it on to two day traders. The men were accused of making 7.4 million pounds (S$14.7 million) from trading six stocks including Sky Plc and Legal & General Group Plc.
Andrew "Grant" Harrison, a former broker at Panmure Gordon & Co, as well as day traders Benjamin Anderson and Iraj Parvizi, were acquitted.
The investigation dates back to 2007 and led to a series of dawn raids three years later that sent shock waves through London's financial community. The arrests showed that the regulator, which had only brought its first insider-trading case in 2009, would take a tougher approach following the financial crisis.
The mixed verdicts may still be considered a victory for the FCA, with the regulator nabbing a banker at a high-profile lender. The results follow the FCA's lead role in tackling market manipulation scandals including those involving the London interbank offered rate and foreign-currency exchange.
"After nine days of deliberation, the FCA will be breathing a huge sigh of relief," said Jason Mansell, a trial lawyer at QEB Hollis Whiteman in London.
"Now that the FX and Libor cases of recent years are coming to a close, once again insider dealing and market abuse is likely to be at the very top of the enforcement agenda."
The 44-year-old Dodgson held his head in his hands after the verdict was read out while Anderson grasped Hind's hand. The men, who weathered an eight-year probe together, all left the court without speaking to reporters.
Anderson's lawyer, Michael Potts, said the verdict was the "correct decision on the evidence." Sentencing for Dodgson and Hind, 56, could come as soon as Thursday. The men face prison terms of as long as seven years and the regulator also said it will seek confiscation of profits considered to be proceeds of their crime.
The verdicts come after the jurors told the court at the end of last week that they had reached an impasse. The judge gave the panel an instruction that allowed them to come to a verdict with a 10-2 vote and send them back to resume deliberations.
The agency had already secured three convictions in other offshoots of the probe, known as Operation Tabernula - Latin for "little tavern" - including former Moore Capital Management LLC trader Julian Rifat, who pleaded guilty in 2014.
Prosecutors said the men used a mix of modern technology and old-school skulduggery to hide their trades. The group gave themselves nicknames such as "Fatty," "Nobu," and "Fruit" and exchanged envelopes filled with cash at Indian restaurants while at the same time relying on encrypted memory sticks and pay-as- you-go phones.
For their part, regulators teamed with police to use surveillance techniques for the first time that produced key evidence.
A bug placed in Anderson's office in 2008 that recorded a conversation in which Parvizi gave a description of Dodgson from Hind, was heavily relied on by the FCA to try to show the men knew they were being given inside information.
"This was an extraordinary and complex case of a type not prosecuted in this country before," Mark Steward, the FCA's director of enforcement and market oversight, said in a statement.
"This case demonstrates our capability and determination to root out this kind of abuse."
The defendants were colourful characters who regaled the jury during testimony with stories from their lives and careers, often inviting laughter. Dodgson and Hind met at a bachelor party.
Parvizi, a flamboyant 50-year-old Iranian multi-millionaire, was particularly entertaining with tales of his gambling exploits. He was also cautioned by the judge about answering questions that might incriminate him at one point when he testified that he would spread false rumours about stocks, which is a crime. He was only charged with insider dealing.
Defence lawyers dismissed the evidence as the result of coincidences from the insular world of the City of London or steps to conceal their actions from employers, rather than police.
Anderson and Parvizi, the two day traders, also argued the whole stock market operated on rumors, most of which were false, and they had no reason to think they were getting inside information.