Deustche Bank Brokers Jailed After “Prolonged, Persistent Bad Behavior” In Biggest Insider Trading Bust Ever
ZeroHedge.com
Two former Deutsche Bank corporate brokers have been sentenced to one of the longest prison terms possible for the crime of insider trading in the UK. As US financial market participants walk free in the streets managing their own “home office” money, Martyn Dodgson and Andrew Hind will be rotting in a Wandsworth prison cell (among the worst reputed of England’s prisons) for up to four and half years for what the judge called “persistent, prolonged and deliberately dishonest behavior.” As Bloomberg reports, the group, including three other defendants, formed part of the FCA’s biggest insider-trading investigation dubbed Operation Tabernula.
The FCA accused Dodgson and Harrison of passing inside information on possible deals from their jobs between 2006 and 2010 to Hind who the agency claimed gave them to Parvizi and Anderson to trade on. All of the men denied the charge. But as Bloomberg reports, the sentences are among the longest handed down in an FCA insider-dealing case…
Martyn Dodgson, 44, was sentenced Thursday in London (to 4 1/2 years in jail) alongside friend and accountant Andrew Hind, who was given a 3 1/2 year prison term for the same offense. The men were found guilty of insider dealing on Monday after a four-month trial.
“This was persistent, prolonged and deliberately dishonest behavior,” Judge Jeffrey Pegden said when handing down the sentence. Dodgson showed a “gross breach of trust.”
The sentences were another victory for the Financial Conduct Authority, which has won 30 convictions for insider trading since it started prosecuting the crime less than a decade ago. The success comes as U.S. prosecutors are struggling with a court ruling that limits their ability to tackle the offense.
Three other defendants in the case, former Panmure Gordon & Co. corporate broker Andrew “Grant” Harrison and day traders Benjamin Anderson and Iraj Parvizi, were acquitted.They also used nicknames including Fatty, Nobu and Fruit in an effort to disguise their identities.
The group formed part of the FCA’s biggest insider-trading investigation dubbed Operation Tabernula. The FCA already secured three other convictions in relation to the probe.
The sentences are among the longest handed down in an FCA insider-dealing case. Former Moore Capital Management LLC trader Julian Rifat, another target in Tabernula, received a 19-month prison sentence last year after pleading guilty.
Finally, we note that, Dodgson and Hind will probably start their sentences in HM Prison Wandsworth, a Victorian jail south of the Thames known for its poor conditions and violent residents.
The City regulator heralded the case as proof it can hold rule-breakers to account…
“This was an extraordinary and complex case of a type not prosecuted in this country before,” said enforcement boss Mark Steward. “The message is loud and clear, that the FCA will not tolerate sophisticated predatory criminals abusing our markets. This case demonstrates our capability and determination to root out this kind of abuse and ensure our market and the investing public are properly protected.
“Dodgson was an experienced and well-paid banker, well aware that what he was doing constituted a criminal offence and who conspired with Hind to abuse our market and to profit at the expense of the investing public.
“The FCA is committed to detecting this kind of abuse and make the perpetrators fully accountable in accordance with the law.”
Martyn Dodgson (left) and Andrew Hind
A former corporate broker at Deutsche Bank who once advised the government on its bailed-out banks has received a record prison sentence for UK insider trading, with a four-and-a-half year term.
Sentencing Martyn Dodgson, 44, on Thursday, His Honour Judge Pegden said at London’s Southwark Crown Court that Dodgson had committed “a gross breach of trust.”
He was convicted earlier this week of a single count of insider trading, along with his close friend, Andrew Hind, an accountant who was once a finance director at retailer Topshop. Hind received a three-and-a-half year sentence on Thursday.
Dodgson’s is the longest jail term ever imposed for insider trading in the UK topping the four years that the former head of Blue Index, a brokerage specialising in contracts-for-difference, received for the crime in 2012.
“This was persistent, prolonged and deliberate dishonest behaviour, which you both knew, in my judgment, was criminal,” said Judge Pegden in his sentencing remarks.
The defendants were both ashen-faced in the dock before being led away, having previously listened to mitigating arguments by the defence barristers with their eyes closed and arms crossed.
Dodgson, who arrived at court with a large green kit bag and who was supported by friends in court, declined to comment ahead of sentencing. Hind, wearing a dark striped polo shirt and dragging a wheeled suitcase, was not available to comment before he entered the dock for the last time.
While large, the sentence “pales in comparison” to “those imposed in the US for securities fraud, which were in double figures,” said Sarah Wallace, a head of regulatory investigations at law firm Irwin Mitchell. “However, the risk of losing your total wealth, most of which may have been amassed lawfully, through what some argue are disproportionately large confiscation orders, with prosecution legal costs on top, can be the most painful part of the sentencing process.”
They were found guilty of a conspiracy that netted about £708,000 from insider trading, which they split between them. The jury found that Dodgson, whom Hind nicknamed “Fruit”, would glean information on upcoming deals from his work as a corporate broker at Lehman Brothers and Deutsche then pass it to Hind, who would then place trades.
For his part, Hind’s nickname was “Nob”. The monikers were just two elements of an enterprise that involved Panamanian and Swiss bank accounts, pay-as-you-go mobile phones, and military-grade encryption devices with passwords such as “Lamborghini55”.
The case, codenamed Tabernula — Latin for “little tavern” — was the most high-profile and complex case of insider trading ever mounted by the markets watchdog, the Financial Conduct Authority. It was also the most expensive, costing £14m in total for the FCA, which is industry-funded.
Three other alleged participants were acquitted by the jury earlier this week: Andrew “Grant” Harrison, who was a former corporate broker at Panmure Gordon who then moved to Lloyds Banking Group; and two “prolific” day traders who placed spreadbets on behalf of Hind, Ben Anderson and Iraj Parvizi, who operated out of an office in London’s Belgravia.
The jury only had to find the defendants guilty of trading in one of the five stocks that was included in the indictment period. As UK juries do not give their reasoning, it is impossible to know in which of the five they were persuaded of the defendants’ guilt.
Mr Harrison showed up to listen to the sentencing hearing; the first time in 12 weeks he has been able to sit in the public gallery rather than the dock.
The overall profits of the alleged conspiracy was £7.4m. While Mr Anderson and Mr Parvizi took the lion’s share of that figure, at £6.3m, under English law those involved in a conspiracy can be liable for the total amount of alleged ill-gotten gains. A confiscation hearing for Dodgson and Hind will take place next year
Three other men have already pleaded guilty as part of the overall Tabernula investigation, launched in late 2007. A separate conspiracy, which the FCA probed in an investigation known as Operation Aldershot, saw guilty pleas from Julian Rifat, a former hedge-fund trader at Moore Capital, Paul Milsom, a former trader at the investment arm of Legal & General, and Graeme Shelley, a former broker at Novum Securities.
Another man may also stand trial. He cannot be named ahead of that.
Tabernula began in late 2007 after the watchdog received a suspicious trade report on bets Mr Anderson and Mr Parvizi made on Scottish & Newcastle. Their trading accounted for 26 per cent of the available shares.
The pair were already on the regulator’s watchlist. Mr Parvizi had also previously been a subject of an abandoned probe into whether he had infiltrated the Bank of England to glean information ahead of time on interest-rate moves, which he strongly denies.
Mr Parvizi, who has already left the UK for Dubai following his acquittal, told the Financial Times that the two failed investigations into him over the last 20 years were an “attempted” fit-up by the UK authorities.
On the stand he admitted spreading false rumours about stocks in which he had taken a large position and was cautioned by the judge for self-incrimination over potential market abuse. The FCA is now “considering carefully” whether it might bring a regulatory sanction against Mr Parvizi, according to Therese Chambers, the regulator’s head of wholesale enforcement.
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