Insider Information

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.

One of the most damaging pieces of evidence in the case against former KPMG senior partner Scott London, charged with criminal insider trading, is a photograph that allegedly shows London accepting an envelope stuffed with cash from his friend, a jeweler named Bryan Shaw. Federal prosecutors say London gave secret financial information about two Southern California companies to Shaw in exchange for thousands of dollars. Prosecutors said Shaw made more than $1 million in illegal profits through trades on the two companies, Herbalife Ltd. and Skechers USA Inc. Full coverage: KPMG auditor accused of insider trading London, 50, who spent more than two decades as an auditor for the accounting powerhouse, was fired last week after acknowledging his role in the insider trading case.

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.

NEW YORK - After building a huge stake in two drug companies, hedge fund manager Mathew Martoma told his powerful boss on a Sunday morning that they had to immediately dump their position. It was an unusual request even by the outsized standards of Wall Street, but the hedge fund quietly liquidated its $700-million position within days. Federal authorities suggested Tuesday why Martoma was in such a hurry back in 2008 - he'd allegedly gotten an illegal tip about big problems with the companies' developmental Alzheimer's drug.

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.

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.

"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.

Setrag Mooradian, a former accountant for Ivan F. Boesky who has given significant information to federal probers investigating illicit stock trading schemes, has settled charges that he helped Boesky break securities laws, the Securities and Exchange Commission said Wednesday. Under the terms of the settlement, Mooradian--who was a vice president for Boesky's Seemala Corp.--will be barred for a year from the securities industry but will not be required to pay a fine or penalty.

NEW YORK - After building a huge stake in two drug companies, hedge fund manager Mathew Martoma told his powerful boss on a Sunday morning that they had to immediately dump their position. It was an unusual request even by the outsized standards of Wall Street, but the hedge fund quietly liquidated its $700-million position within days. Federal authorities suggested Tuesday why Martoma was in such a hurry back in 2008 - he'd allegedly gotten an illegal tip about big problems with the companies' developmental Alzheimer's drug.

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,...

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.

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.

There he was, John Brodie, former star quarterback of the San Francisco 49ers and Stanford University, an occasional player on the senior golf tour, a former broadcaster known for his clean-cut image, touting gambling tips on television, over a phone hotline and in newspapers, his face prominently displayed in ads nestled among those of handicappers like Jimmy the Fixer and Dr. Sam. John Brodie? It was like finding David Copperfield selling the secrets of his magic tricks.

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.

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.