Cocktail Napkin Insider Tip Leads to Federal Conviction
BOSTON – Following a three-day trial, a Boston-area real estate developer was convicted today of engaging in insider trading for buying – and later selling – shares of Wainwright Bank & Trust Company (“Wainwright”) based on a tip that Wainwright would be acquired. Prior to the acquisition, shares of Wainwright traded on the Nasdaq Stock Market.
Robert H. Bray, 78, of Watertown, was convicted by a jury of one count of securities fraud. He was acquitted of a separate count of conspiracy. U.S. District Court Judge William G. Young scheduled sentencing for May 4, 2016.
Bray is the owner of R&B Construction, a construction and real-estate development company that operates in the Cambridge and Watertown area. As the government proved at trial, in June 2010, Bray was tipped by a friend who was an executive at Boston-based Eastern Bank Corp. (“Eastern Bank”) that Wainwright would be acquired. The tip – more than two weeks before the acquisition was publicly announced – was passed on a napkin slipped to Bray over drinks at a country club bar in Watertown where both men are members. On Monday, June 14, 2010, Bray 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. Bray 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 percent 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. Bray ultimately sold his shares for a profit of approximately $300,000.
United States Attorney Carmen M. Ortiz and Harold Shaw, Special Agent in Charge of the Federal Bureau of Investigation, Boston Field Division, made the announcement today.
“Today’s conviction underscores our commitment to making sure that there is a level playing field for all securities investors – and that those who would pass on confidential corporate information on napkins at bars, in whispered conversations on golf courses or in any other way, are held accountable for their actions,” said U.S. Attorney Ortiz.
“Mr. Bray thought he could engage in a back-door deal to get rich quick. By capitalizing on insider information, he cheated the system established to protect hard-working investors. Financial fraud is not a victimless crime and the FBI will do everything it can to identify those individuals who are trying to undermine the integrity of the financial market,” said Special Agent in Charge Shaw.
The maximum sentence under the statute is 20 years in prison to be followed by three years of supervised release and a fine of up to five million dollars. 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 U.S. Securities and Exchange Commission in the course of investigating this case. The case was prosecuted by Stephen E. Frank and Eric P. Christofferson of Ortiz’s Economic Crimes Unit.