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San Fernando Jeweler Pleads Guilty to Conspiracy Charges

Okabe & Haushalter May 7, 2013 Fraud

A jeweler from the San Fernando Valley area has recently pled guilty to his conspiracy charges. The jeweler was involved in an insider trading scheme in which he made close to $1.3 million because of stock trading tips he received from his partner, an employee for KPMG. Part of his sentence requires the jeweler to return the $1.3 million in gains.

He will also face a maximum federal prison sentence of five years and additional fines. The Insider Trading Sanction Act and other legislation regarding insider trading practices allow for penalties to be up to 3x the profit gained from the illegal stock trading. In exchange for aiding in this insider trading investigation, prosecutors agree to give the jeweler a reduced sentence.

The jeweler’s friend and KPMG’s employee has been criminally accused of giving tips on several large companies so that the jeweler could make gains from stock trading. Some of those large companies include Herbalife and Skechers USA. These tips were not free. The jeweler admits to paying his friend for these tips.

The payment? Over $60,000 in cash, a $12k Rolex watch, jewelry, concert tickets and other miscellaneous “gifts.” The KPMG employee has since been fired and is set for arraignment on May 17th in the United States District Court in Los Angeles. His position was “Senior Partner” at this accounting firm. He managed hundreds of other employees and personally audited for major clients.

It is illegal, according to § 78-t-1 of 15 U.S.C., to trade or share information that should remain confidential. It is considered unfair competition to be able to buy the information that cannot be generally known, as it gives an individual an unfair advantage in the stock market. The information that the KPMG employee gave to his jeweler friend would have been made available to the public eventually, but at the time the information was bought, only KPMG senior officials could have known the information.

The KPMG employee also advised his friend how to trade in such a way so that federal investigators wouldn’t detect anything. This is commonly considered a white collar crime, as the motive was financial rather than violent. According to one of the federal prosecutors, “These men broke ethical rules and criminal laws for the sole purpose of lining their pockets with illegal profits.”

The jeweler likely agreed to a plea deal for two reasons: 1) He knew that the evidence against him was too strong, and 2) He knew he could receive a lighter sentence for pleading guilty and aiding prosecutors in the investigation. As it was in this case, a plea agreement can be a favorable option.

Insider trading and other similar fraud/conspiracy schemes are very serious as they are federal offenses. Those being investigated and those who have been charged with these types of crimes will have to go stand up in federal court. For these types of cases, you need an attorney experienced with federal cases. Okabe & Haushalter has handled some of the largest fraud and federal cases in the nation. To learn more about representation from our firm, please call today.