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Justice News

Department of Justice
U.S. Attorney’s Office
District of Massachusetts

FOR IMMEDIATE RELEASE
Monday, August 18, 2014

Bank Executive Arrested For Insider TradingAllegedly Tipped Off Friend At Country Club About Bank Acquisition

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BOSTON - A former executive of Boston-based Eastern Bank Corp. was arrested and charged today with participating in an insider trading conspiracy.

It is alleged that John Patrick O’Neill, 64, of Belmont, secretly tipped off a friend about the sale of Wainwright Bank & Trust Company, which was acquired by Eastern Bank in 2010. Prior to the acquisition, shares of Wainwright traded on the Nasdaq Stock Market.

O’Neill, who was a Senior Vice President and Senior Credit Officer at Eastern Bank, is charged with conspiracy to commit securities fraud. He was a member of Eastern Bank’s due diligence team that evaluated the Wainwright acquisition in the weeks leading up to the deal.

It is alleged that O’Neill tipped his friend (“CC-1”) to Wainwright’s sale over the weekend of June 11, 2010, more than two weeks before the acquisition was publicly announced, during a face-to-face encounter at the Watertown country club where both men are members. On the next trading day, O’Neill’s friend called his broker to ask how he could buy 25,000 shares of Wainwright stock, which he acknowledged “kinda sounds crazy,” given how thinly the stock traded. CC-1 ultimately purchased a total of 31,000 Wainwright shares over the next two weeks, at prices between $8.85 and $9.90 per share, single-handedly accounting for some 56% of the total trading volume in Wainwright shares during that period. On June 29, 2010, Eastern Bank announced its agreement to acquire Wainwright for $19 per share in cash, a premium of nearly 100% over the stock’s prior closing price. CC-1 ultimately sold his shares for a profit of more than $300,000.

United States Attorney Carmen M. Ortiz said, “Insider trading is a serious crime that undermines the integrity of our financial markets. Corporate executives who misuse their access to confidential information to benefit themselves or their friends are simply stealing from thousands of Americans who invest their savings in the stock market without that inside knowledge. We will continue to aggressively investigate and prosecute this kind of behavior, whether it happens in the boardroom, on the golf course, or over drinks at a bar.”

Vincent B. Lisi, Special Agent in Charge of the Federal Bureau of Investigation in Boston said, “Let me be clear, there are many tripwires in place to detect suspiciously timed trades and as a result of those tripwires numerous people in the Boston area have been charged with insider trading based on parallel FBI and SEC investigations. The risk versus reward calculation for insider trading should be clear based on the increasing number of those recently charged.”

The maximum sentence under the statute is five years in prison, followed by three years of supervised release and a fine of the greater of $250,00 or twice the gross gain or loss. Actual sentences for federal crimes are typically less than the maximum penalties. Sentences are imposed by a federal district court judge based upon the U.S. Sentencing Guidelines and other statutory factors.

The United States Attorney’s Office received valuable assistance from the Securities & Exchange Commission, which today filed a separate civil action in federal court. The case is being prosecuted by Stephen E. Frank and Eric P. Christofferson of Ortiz’s Economic Crimes Unit.

The details contained in the complaint are allegations. The defendant is presumed innocent unless and until proven guilty beyond a reasonable doubt in a court of law.