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Investment Banker Received Kickbacks in Cash And Gold For Stolen Inside Information
CHARLOTTE, N.C. – A former Wells Fargo investment banker and three of his conspirators were sentenced today on insider trading conspiracy and related charges, announced Anne M. Tompkins, U.S. Attorney for the Western District of North Carolina. Today’s sentencings stem from the Charlotte-based FBI investigation, “Operation Insider Out,” which began in early 2012 and identified targets involved in insider trading activities in the Charlotte area.
John A. Strong, Special Agent in Charge of the Federal Bureau of Investigation, Charlotte Division joins U.S. Attorney Tompkins in making today’s announcement.
John W. Femenia, 33, of Greenwich, Conn., was sentenced to five years in prison and two years of supervised release. Shawn C. Hegedus, 34, of Centereach, N.Y. was sentenced to ten years in prison and two years of supervised release. Matthew J. Musante, 34, of Miami, Fla., was sentenced to 42 months in prison followed by two years of supervised release. They each pleaded guilty to insider trading and money laundering conspiracy charges. Danielle C. Laurenti, 34, of Massapequa Park, N.Y. was sentenced to 19 months (time served) in prison followed by two years of supervised release. Laurenti pleaded guilty to one count of insider trading conspiracy.
Four other codefendants who previously pleaded guilty to insider trading conspiracy have already been sentenced:
• Roger A. Williams, 53, of Georgetown, S.C., was sentenced to 24 months in prison and one year of supervised release.
• Kenneth M. Raby, 52, of Greer, S.C., was sentenced to 18 months in prison and one year of supervised release.
• Aaron M. Wens, 34, of Encinitas, Calif., was sentenced to six months in prison and one year of supervised release.
• Frank M. Burgess, Jr., 44, of Charlotte, was sentenced to six months in prison and one year of supervised release.
• James A. Hayes, 40, also of Charlotte, was sentenced to one year of probation.
According to filed court documents and today’s sentencing hearings, from March 2010 through December 2012, the conspirators conducted illegal insider trading activities based on stolen material non-public information, including information on Wells Fargo and its clients’ upcoming corporate mergers and acquisitions. Stealing material non-public inside information allows a trader to cheat and earn substantial profits by trading before such news becomes public, thereby earning substantial profits by trading again once the news becomes public and impacts the price of a stock.
Femenia, an investment banker who lived in Charlotte and later in New York, stole from his employer, Wells Fargo, and its clients, material nonpublic information about upcoming mergers and acquisitions, and passed the inside information to his conspirators who then used it to conduct illegal trades. These conspirators then passed the confidential inside information to other conspirators who also then traded on that information, court records indicate. The criminal conspiracy netted over $11 million in proceeds as a result of the illegal insider trading activities, court records show.
According to court records, Femenia was paid kickbacks for the stolen information in several forms. Court records indicate that Hegedus, who was a stockbroker and Femenia’s high-school friend, used the proceeds of the insider trading to buy 55 gold bars. Femenia then sold four of the gold bars for $70,877. Femenia also received kickbacks in cash, including via ATM cash deposits made to account in the name of Femenia’s girlfriend. Court records indicate that Hegedus and his wife, Laurenti, laundered proceeds of the insider trading through a casino in Las Vegas. Court records also show that Femenia and Hegedus engaged in mortgage fraud through the fraudulent purchase of a luxury home in Waxhaw, N.C.
In announcing today’s sentencings, U.S. District Judge Robert J. Conrad Jr. stated that the sentences imposed were intended to deter other insider traders and to recognize the seriousness of the offense.
Femenia and Musante have been released on bond and will be ordered to self-report to the Federal Bureau of Prisons (BOP) to begin serving their sentences. Hegedus, who previously fled to Cuba, has been detained since his return to the United States over the summer of 2013 and will be transferred to BOP’s custody upon designation of a federal facility.
U.S. Attorney Tompkins commended the FBI for their investigation of the case, and thanked the U.S. Securities and Exchange Commission, the Financial Industry Regulatory Authority, and Wells Fargo for their invaluable assistance.
The prosecution for the government was handled by Assistant United States Attorneys Kurt W. Meyers and Kelli H. Ferry of the Charlotte office.President Obama established the Financial Fraud Enforcement Task Force to wage an aggressive, coordinated and proactive effort to investigate and prosecute financial crimes. The President’s Financial Fraud Enforcement Task Force includes representatives from a broad range of federal agencies, regulatory authorities, inspectors general, and state and local law enforcement who, working together, bring to bear a powerful array of criminal and civil enforcement resources. The task force is working to improve efforts across the federal executive branch, and with state and local partners, to investigate and prosecute significant financial crimes, ensure just and effective punishment for those who perpetrate financial crimes, combat discrimination in the lending and financial markets, and recover proceeds for victims of financial crimes. For more information on the task force, visit www.stopfraud.gov.