Former Stock Broker Pleads Guilty In Manhattan Federal Court To Insider Trading Charges
Preet Bharara, the United States Attorney for the Southern District of New York, announced that DAVID J. WEISHAUS, a former stock broker at a securities trading firm (“Securities Trading Firm-1”), pled guilty today in Manhattan federal court to charges arising from his involvement in an insider trading scheme. The alleged scheme involved the misappropriation of material, non-public information (“Inside Information”) concerning IBM’s acquisition of a software company, SPSS, Inc., in 2009. WEISHAUS was charged in November 2012, and pled guilty today before U.S. District Judge Andrew L. Carter, Jr., pursuant to a cooperation agreement.
According to the Indictment to which WEISHAUS pled guilty, statements made during the plea proceeding, and other court documents:
The Inside Information concerning IBM’s acquisition of SPSS originated from a corporate lawyer who was part of the legal team that represented IBM in the transaction (“Attorney-1”) in 2009. On May 31, 2009, Attorney-1 shared Inside Information concerning the transaction, including the names of the parties and the fact that IBM was going to acquire SPSS for a significant premium over its market price, with his close friend, Trent Martin, a former research analyst at an international financial services firm. The information was shared in confidence and, based on their longstanding history of sharing confidences, Attorney-1 expected that Martin would not share the information or use it to trade.
However, in June and July 2009, Martin bought SPSS common stock and call option contracts based on the Inside Information he was given by Attorney-1 and, in turn, shared the tip with his roommate, Thomas Conradt, who worked as a stock broker at Securities Trading Firm-1. In June and July 2009, Conradt bought SPSS common stock and tipped WEISHAUS, his co-worker at Securities Trading Firm-1, who also bought SPSS common stock and call options. Conradt also tipped his co-workers at Securities Trading Firm-1 (“CC-1 and CC-2”), who then bought SPSS call option contracts. When IBM announced its acquisition of SPSS on July 28, 2009, the share price of SPSS common stock rose by 41% in one day. Thereafter, Martin, Conradt, WEISHAUS, CC-1, and CC-2 sold their SPSS positions, yielding total profits of approximately $1 million.
WEISHAUS, 33, of New York, New York, pled guilty to one count of conspiracy to commit securities fraud and one count of securities fraud. The conspiracy count carries a maximum sentence of five years in prison and a fine of $250,000, or twice the gross gain or loss from the offense. The securities fraud count carries a maximum sentence of 20 years in prison and a maximum fine of $5 million. As part of his plea agreement, WEISHAUS agreed to forfeit his share of the proceeds obtained from the offense. He is scheduled to be sentenced by Judge Carter on April 25, 2014, at 3:15 p.m.
Mr. Bharara praised the investigative work of the Federal Bureau of Investigation. He also thanked the U.S. Securities and Exchange Commission. Mr. Bharara noted that the investigation is continuing.
This case was brought in coordination with President Barack Obama’s Financial Fraud Enforcement Task Force, on which Mr. Bharara serves as a Co-Chair of the Securities and Commodities Fraud Working Group. The task force was established to wage an aggressive,
coordinated and proactive effort to investigate and prosecute financial crimes. With more than 20
federal agencies, 94 U.S. attorneys’ offices and state and local partners, it’s the broadest coalition
of law enforcement, investigatory and regulatory agencies ever assembled to combat fraud. Since its formation, the task force has made great strides in facilitating increased investigation and prosecution of financial crimes; enhancing coordination and cooperation among federal, state and local authorities; addressing discrimination in the lending and financial markets and conducting outreach to the public, victims, financial institutions and other organizations. Over the past three fiscal years, the Justice Department has filed nearly 10,000 financial fraud cases
against nearly 15,000 defendants including more than 2,900 mortgage fraud defendants. For
more information on the task force, please visit www.StopFraud.gov.
This case is being handled by the Office’s Securities and Commodities Fraud Task Force. Assistant U.S. Attorneys John T. Zach and Telemachus P. Kasulis are in charge of the prosecution.