Biggest Insider-Trading Scandal in Two Decades Exposed

Prosecutors in New York and Washington yesterday laid criminal charges against a group of current and former employees of U.S. top banks for a tempest involving over more than $15 million in illegal profits by trading in inside information.

Regulators described the scheme as “one of the most pervasive insider-trading scandals since the days of Ivan Boesky and Dennis Levine in the late 1980s.” 13 people have been charged with it.

According to the U.S. attorney of the Southern District of New York, Michael Garcia, four of the thirteen people who traded on the inside information have already been held to be accountable for criminal charges, while the others were taken into custody early Thursday and were charged later in the afternoon.

Morgan Stanley attorney Randi Collotta and UBS executive Mitchel Guttenberg were suspected to have passed inside information to Wall Street traders and brokers.

Federal authorities claim that an executive at UBS sold information about approaching changes in ratings of stocks and the information about upcoming corporate mergers was leaked by a former Morgan Stanley compliance officer. For the right to get shares in hot initial public offerings, a broker at the Bank of America had also been paid.

In order to steer clear of any risks related to the records of their phone calls, the men used disposable cell phones and exchanged text messages in code, authorities said.

"Today's events should send a message to anyone who believes that insider trading is a quick and easy way to get rich," said SEC Enforcement Director Linda Chatman Thomsen.

According to Doug Morris, a spokesman for UBS in New York, Swiss-based UBS is providing full support to the authorities for their inquiry into the suspected actions of the UBS employee. The U.S. Attorney has described UBS as a victim of this alleged scheme.

Morgan Stanley said, "We have cooperated and are continuing to cooperate fully with authorities regarding a former employee who allegedly stole information from Morgan Stanley."