Michigan Resident Convicted Of Obstructing SEC Investigation
SAN FRANCISCO – A federal jury convicted Karim Iskander Bayyouk today of obstruction of justice, United States Attorney Melinda Haag announced.
The jury found that on or about May 31, 2007, Bayyouk obstructed and impeded an investigation by the Securities and Exchange Commission (“SEC”) into securities fraud and insider trading relating to Biosite Incorporated securities. The guilty verdict followed a five-day jury trial before the Honorable Edward M. Chen, U.S. District Court Judge.
The indictment stems from an insider trading scheme first charged in 2009 against Maher Fayez Kara, of San Carlos, Calif., a former investment banker at Citigroup Global Markets Inc. in New York, and Maher Kara’s brother, Mounir Fayez Kara, also known as Michael F. Kara, of Walnut Creek, Calif.
Evidence at trial showed that on or about March 23, 2007, Bayyouk purchased approximately $100,000 in Biosite call options. Two days later, on March 25, 2007, Biosite announced it was merging with another company. After the merger announcement, Bayyouk sold the options and realized a profit of approximately $947,922. On or about May 31, 2007, attorneys from the SEC’s Division of Enforcement in San Francisco, Calif., conducted a telephone interview of Bayyouk as part of an insider trading investigation. During the interview, Bayyouk falsely stated, among other things, that he did not speak to anyone before investing in Biosite, that no one suggested Biosite to him, and that he did not suggest Biosite to his brother, who also traded Biosite call options on March 23, 2007. Evidence showed that the defendant traded in Biosite based on a tip from an individual who was tipped by Michael Kara, who had received inside information from his brother, Maher Kara.
“Fairness is fundamental to our financial markets and critical to everyday investors,” said U.S. Attorney Melinda Haag. “Karim Bayyouk benefited from an insider trading scheme and made approximately $1 million based on information only available to a select few insiders. This verdict should send a strong message to those who might be tempted to obstruct efforts to insure a level playing field for all investors.”
Bayyouk, 49 of Livonia, Michigan, was indicted by a federal grand jury on May 29, 2012. He was charged with one count of obstructing proceedings before the SEC, in violation of 18 U.S.C. § 1505. Bayyouk is currently released on bond.
Bayyouk’s sentencing hearing is scheduled for January 15, 2014, at 2:30 p.m. before Judge Chen in San Francisco. The maximum statutory penalty for a violation of 18 U.S.C. § 1505 is five years in prison and a fine of $250,000. Maher and Michael Kara each pleaded guilty in July 2011 to one count of conspiracy, in violation of 18 U.S.C. § 371, and one count of securities fraud, in violation of 15 U.S.C. §§ 78j(b) and 78ff. They are awaiting sentencing. Any sentence ordered in these cases will be imposed by the court only after consideration of the U.S. Sentencing Guidelines and the federal statute governing the imposition of a sentence, 18 U.S.C. § 3553.
Adam A. Reeves and Robert S. Leach are the Assistant U.S. Attorneys prosecuting the case with the assistance of Maryam Beros, Rayneisha Booth, and Patricia Mahoney. The prosecution is the result of a lengthy investigation by the Federal Bureau of Investigation with substantial assistance from the Division of Enforcement of the SEC’s San Francisco Regional Office.