Insider Information

A young former Merrill Lynch analyst caught in a sprawling, $7-million insider trading scheme must serve more than three years in prison to show Wall Street that sharing valuable inside secrets will not be met with leniency, a judge said Friday. U.S. District Judge Kenneth M. Karas said he was sending Stanislav Shpigelman, 24, of Brooklyn, N.Y.

A long-running takeover bid for Malibu toy maker Jakks Pacific Inc. took a turn toward conciliation with the Los Angeles investment management firm that wants to buy it. After fending off an unsolicited takeover bid from Oaktree Capital Management, Jakks agreed to give the management firm detailed financial information about the company, setting the stage for another bid. But a sale of Jakks, one of the nation's largest makers of action figures,...

A former Cruttenden & Co. stockbroker pleaded guilty Wednesday to receiving gifts, including a $50,000 Jaguar luxury car, from Spectrum Information Technologies in return for helping the wireless data company manipulate its stock price. Federal prosecutors said Reagan Richmond, 34, of Tustin, conspired to manipulate Spectrum stock between 1992 and 1994 while working as a broker at Irvine-based Cruttenden, now known as Cruttenden Roth, and at Regency Capital Group Inc. in Glendale.

The House passed a sweeping new ethics bill that bans lawmakers from using insider information for personal gain, but Republican leaders came under criticism for softening the legislation in a way that some view as beneficial to Wall Street investors. Democrats joined Republicans to give the bill overwhelming support - it passed 417 to 2 - as lawmakers try to show voters they are holding themselves to tough ethical standards. The Senate gave nearly unanimous approval to a different version of the bill last week.

Retired Adm. James A. (Ace) Lyons Jr. said Friday his name became linked to the Pentagon bribery and fraud scandal because top Navy officials approved a consulting contract for him with McDonnell Douglas Corp. last December at a time when they knew the FBI's secret investigation was under way. Lyons, in an interview with The Times, accused federal investigators and a group of "vindictive zealots" inside the Pentagon of conducting a smear campaign against him and former Navy Secretary John F.

Concern that loosening regulators' reins on stock markets might breed fraud and manipulation has led some countries to reach for the statute book. But in West Germany, where banks do the bulk of share dealing while helping to run the companies whose shares they handle, the problem is tackled on a less formal basis. There is no law barring insider trading, which occurs when company officials or stockbrokers use information not available to other investors to make a profit from share dealing.

Orange County businessman William P. Foley II was accused in a lawsuit filed Tuesday of illegally using insider information to acquire more than 8% of the company that controls the troubled Rally's Hamburgers Inc. chain. The suit, filed in U.S. District Court in Los Angeles, also alleges that Foley, chairman of Irvine-based Fidelity National Financial Inc. and CKE Restaurants in Anaheim, failed to accurately report how much Giant Group Ltd.

Of all the factors that investors consider when determining which stocks to own, the level of buying by company managers and directors in their own shares has long been one of the most important. Insiders understand their companies' prospects better than anyone else. So if they're shelling out their personal funds to buy shares, they must feel pretty good about the outlook. And it would seem that investors who follow insiders into those stocks are bound to make money.

Former Enron Corp. Chief Executive Jeffrey K. Skilling was among many American shareholders who sold stock at their first opportunity in the days after the Sept. 11, 2001, terrorist attacks. But prosecutors in his fraud and conspiracy trial allege that he sold 500,000 Enron shares on Sept. 17 that year because he had inside information that the energy company was in serious trouble -- not because he was a panicked shareholder in a roiled market.

In the wake of Pete Rose's expulsion from baseball for betting and George Steinbrenner's admission that he gave $40,000 to a gambler, sports and law enforcement officials say they are concerned about the growing influence of gambling on college and professional leagues.

Former Goldman Sachs director Rajat K. Gupta was arrested by FBI agents in New York on charges that he leaked corporate secrets to a hedge fund manager, making him the highest-ranking corporate executive implicated in the government's long-running crackdown on insider trading. Gupta, who was also a director of Procter & Gamble, is accused of supplying inside information about both companies to Galleon Group hedge fund founder Raj Rajaratnam, who used the information to make illegal, profitable trades and avoid millions of dollars of losses, prosecutors said.

Former Angels baseball player Doug DeCinces has agreed to pay $2.5 million to settle allegations that he used inside information to score big profits trading the stock of Santa Ana-based Advanced Medical Optics Inc. The Securities and Exchange Commission announced the settlement Thursday. Authorities said DeCinces, acting on an illegal tip, bought more than 83,000 shares of Advanced Medical Optics in the weeks leading to its 2009 acquisition by Abbott Laboratories Inc. Shares of Advanced Medical Optics increased 143% after a public announcement in January 2009 that it would be acquired by Illinois-based Abbott.

A former Nasdaq executive has pleaded guilty to securities fraud for using insider information that, regulators allege, helped him net $755,000 trading stocks on the exchange. Donald Johnson admitted Thursday in a federal court in Virginia that he made trades on eight separate occasions from 2006 to 2009 using information he was given as part of his work for Nasdaq's market-intelligence unit in New York. "This case is the insider trading version of the fox guarding the henhouse," Robert Khuzami, the director of enforcement at the Securities and Exchange Commission, said in a statement.

A former Goldman Sachs Group Inc. director accused of leaking confidential information is suing the Securities and Exchange Commission, saying the agency "unfairly and unconstitutionally" singled him out. The SEC has accused Rajat Gupta, former head of consulting firm McKinsey & Co., of giving inside information about Goldman to his friend and business partner Raj Rajaratnam. Rajaratnam, former head of the Galleon hedge funds, is on trial on 14 counts of insider trading. He has denied any wrongdoing.

A federal effort to root out illegal stock trading allegedly based on inside information from networks of corporate executives gained traction with the arrests of four tech industry figures and the disclosure of a guilty plea by a fifth. One of those arrested, a former employee of a supplier of parts for Apple Inc.'s iPhone and iPad, is accused of passing along secret information about those wildly popular products. The central figure in Thursday's arrests was James Fleishman, a former salesman at Primary Global Research, one of several so-called expert-network firms that prosecutors have investigated in recent months.

Armies of Wall Street lawyers are massing for battle as the Justice Department ramps up perhaps its biggest insider-trading investigation in history. But an Oregon technology analyst who has unexpectedly become one of the public faces of the probe ? by openly defying the government's efforts to get his cooperation ? says he hasn't hired an attorney and expects to defend himself in court "if it comes to that. " "I think I can convince a jury that I've done nothing wrong," said John Kinnucan, who for the last 11 years has operated a tech industry information service known as Broadband Research.

"Inside information" about the Atlanta Falcons, cited by a handicapping service to bolster its claims that bettors are paying for solid information that can affect the outcome of games, was completely bogus, the team's quarterback said Friday. Quarterback Chris Chandler of the Atlanta Falcons flatly denied an account that had been provided to The Times by Marc Meghrouni, president of a sports handicapping service called the Price Group.

The Securities and Exchange Commission has launched a preliminary inquiry into whether energy consultants advising Gov. Gray Davis used inside information to trade stocks of power companies doing business with the state, a source with knowledge of the matter said Monday. The federal agency began its review late last week, the source said, in response to a request from California Secretary of State Bill Jones.

The government made the first arrest in a broad investigation of alleged insider trading on Wall Street, charging an employee of a California research firm used by hedge funds. Don Ching Trang Chu was arrested at his home in Somerset, N.J., and charged in federal court in New York with two counts of conspiracy to commit fraud. He was released on a $1-million bond. A complaint filed by prosecutors says Chu helped hedge funds get inside information on publicly traded companies by connecting the funds with employees of the firms.

Federal investigators in New York are wrapping up an extensive investigation into allegations of insider trading and other stock-trading irregularities that could bring criminal charges or monetary fines against a large number of Wall Street executives and investors, a Washington official who has been briefed on the inquiry said Saturday. Speaking anonymously so as not to jeopardize the case, the official said the investigation has been underway for "several years" and is likely to result in the prosecution of traders "around the country.