Charter School Proponent Carl Icahn Probed For Insider Trading

Now for a charter school insider trading story.

No, this is not about Whitney Tilson and that funky little Barnes and Noble thing from 2012.

This is about Carl Icahn, some sports and gambling pals and Clorox:

The feds are investigating whether golf legend Phil Mickelson, billionaire investor Carl Icahn and Vegas gambling kingpin William “Billy” Walters took part in an insider-trading scheme, federal law-enforcement sources told The Post Friday.

The FBI and the Securities and Exchange Commission suspect that Mickelson and Walters illegally traded on nonpublic information from Icahn about his investments in public companies — specifically his attempted takeover of ­Clorox, the sources said.

The two-year investigation was launched after Icahn made a $10 billion offer for Clorox in July 2011, causing the stock to skyrocket amid a rash of suspicious trading, according to sources with knowledge of the probe.

The feds and Manhattan federal prosecutors are examining Mickelson’s and Walters’ trading patterns to determine whether they profited by trading Clorox as its stock price spiked.

Investigators believe that Icahn, 78, may have passed potentially profitable information to Walters — who is well-known in Las Vegas for his big bets on sports — and that the gambler may have passed some tips along to Mickelson, federal sources told The Post.

Both Mickelson and Walters made similar trades in Clorox stock at about the same time, the sources said.

The investigators also examined phone records for Icahn and Walters, 67, to see whether the two men spoke shortly before the trades.

Icahn is a proponent of charter schools and has helped fund seven charter schools through his philanthropic organization.

All seven charters are named for him.

The Wall Street Journal reports no case may ever be brought against Icahn, Mickelson, or Walters:

There is no indication the government will bring a case in the current investigation, the people briefed on the probe said. Indeed, publicity of the probe could jeopardize the government's ability to put together any potential case, they said, by limiting its ability to covertly gather evidence.

The investigation signals that the FBI and the SEC are concerned about a potential dark side of shareholder activism. Activist investors push for broad changes at companies or try to move stock prices with their arguments. Mr. Icahn, a 78-year-old billionaire, has come to epitomize such activism in U.S. boardrooms.

But the Journal also reports there was much funkiness around the Clorox deal:

The government investigation began three years ago after Mr. Icahn accumulated a 9.1% stake in Clorox Co. CLX +0.16% in February 2011, said the people briefed on the probe. On July 15, 2011, he made a $10.2 billion offer for Clorox that caused the stock to jump.

Well-timed trading around the time of his bid caught the attention of investigators, who began digging into the suspicious trading in Clorox stock, the people familiar with the probe said. 

On Wall Street, rumors had swirled that word leaked out ahead of Mr. Icahn's Clorox bid. Large, highly risky trades had been made in Clorox options four days before his bid. After his $76.50-a-share offer was announced, those options soared in value along with Clorox shares, which closed on July 15 up 8.9% at $74.55.

Investigators have examined trades in Clorox options, the people briefed on the probe said. 

Clorox rejected Mr. Icahn's overture. He launched a proxy battle in August 2011, proposing a slate to replace the company's board with 11 of his nominees. In September 2011, he dropped his proxy battle.

By December 2011, he had sold his entire 12 million shares in the company. Clorox shares, which reached a high in 2011 just after Mr. Icahn's bid, closed at around $66 at the end 2011. A Clorox spokeswoman declined to comment.

I'm sure Icahn will manage to extricate himself from any problems here, but this episode is just another example of some of the corruption that infects these charter school proponents and edu-entrepreneurs.

Hedge Fund Manager/Education Reformer Fined $7.2 Million Pounds For "Insider Dealing"

The crimes involving teacher bashers just don't stop today.

First I posted earlier how twenty employees of the teacher-bashing News Corporation have been arrested over the last half year in various charges ranging from phone hacking, computer hacking, conspiracy to cover up a crime, destroying evidence of a crime, bribing police and lying to police.

Now comes word that famed hedge fundie/education reformer/DFER advisor David Einhorn has gotten in trouble with the law as well:

Hedge fund manager David Einhorn, whose short selling famously helped to bring down Lehman Brothers bank, has been fined £7.2m for insider dealing by the UK regulator.

Einhorn, the owner of Greenlight Capital, engaged in "market abuse" in relation to a fundraising by pub group Punch Taverns in June 2009, the Financial Services Authority (FSA) has ruled.

According to the City watchdog, Einhorn was told by a corporate broker acting on behalf of Punch Taverns that the company was preparing a significant equity fundraising. Moments after the telephone conversation ended, Einhorn gave instructions to sell all of Greenlight's holding in Punch.

At the time these instructions were given, Greenlight held 13.3% of Punch shares. Over the next four days Greenlight sold 11,656,000 Punch shares, reducing its holding in Punch from 13.3% to 8.89%.

On 15 June 2009, Punch announced a fundraising of £375m, after which the price of its shares fell by 29.9%. Greenlight's trading had thereby avoided losses of approximately £5.8m for the funds under its management.

The fine is a major blow for Einhorn's reputation. His career has been built on a talent for spotting wrongdoing in other firms. In a statement the hedge fund boss called the decision "unjust and inconsistent" and said the company had paid the fine rather than continue the "arduous fight"

...

Tracey McDermott, the FSA's acting director of enforcement and financial crime, said: "Einhorn is an experienced professional with a high profile in the industry. We expect someone in his position to be able to identify inside information when he receives it and to act appropriately.

"His failure to do so is a serious breach of the expected standards of market conduct. It is highly damaging to market confidence when privileged shareholders commit market abuse, and the high penalty reflects the seriousness of his breach

I breathlessly await the New York Post to do a story about David Einhorn's breach of ethics, his moral failings and the need to remove him from the Board of Advisors of the Democrats for Education Reform since nobody who shows this kind of moral failing ought to be involved in education.

Of course since every other member of both the Board and the Board of Advisors for the DFER's is a Wall Street criminal and since the New York Post actually admires the kind of criminal activity these people engage in, I better not wait too long for that Post story.

Insider Trading Arrests

It's been a busy few days on the corruption beat.

First four consultants hired by the Bloomberg administration as part of the CityTime payroll project were arrested yesterday for stealing $80 million from the city.

Today, there were arrests in the insider trading investigation the feds have been conducting.

All these "corporate consultants" getting frogmarched into custody lately.

But of course savvy businesspeople must continue to run the economy, foreign policy, health care polic,y education policy, etc.

Because they know best.

Use Of Wiretaps In Insider Trading Investigation Of Hedge Funds Widens

This could get really, really good:

WASHINGTON — Secret, court-approved wiretaps put in place more than two years ago are now being used by prosecutors in a widening inquiry of securities fraud and insider trading involving hedge funds and consultants that provide industry research, according to court documents and interviews with people close to the investigations.

The wiretaps were originally part of an insider trading investigation of the New York hedge fund Galleon Group. Those wiretaps, which involved the phones of at least seven individuals, potentially provided prosecutors with a vast array of new evidence for use in the latest investigations. Only four of the seven wiretap targets have been identified in court papers that have been made public so far in the Galleon case.

The expanded use of the secret wiretaps in the new inquiries was revealed last week by the United States attorney in Manhattan when the Federal Bureau of Investigation arrested Don Ching Trang Chu, a consultant at Primary Global Research, on securities fraud and conspiracy charges.

Expert networking firms, like Primary Global, which seek to link corporate executives or industry insiders with investment managers, have grown rapidly in recent years as securities regulators have cracked down on the ways that company managers can tell Wall Street stock analysts about corporate developments.

The case involving Mr. Chu relied on information gathered in one of the seven wiretaps set up in the Galleon investigation, according to court documents. The Galleon case, which began after insider-trading charges were filed against its founder, Raj Rajaratnam, in October 2009, was the first insider trading case to rely on wiretaps. It has so far resulted in criminal charges against 23 people and more than a dozen guilty pleas.

A federal judge allowed the use of the wiretapped conversations in the Galleon prosecutions last week. As a result, the secret wiretaps are likely to be used to bring more cases related to the expert-network firms, say people close to the investigation, who spoke on the condition of anonymity because the investigation was still unfolding. The trove of wiretap recordings include conversations involving at least 550 people.

Those wiretaps are in addition to recordings made by several targets of the Galleon insider trading investigations who agreed to cooperate with law enforcement by wearing recording devices after prosecutors confronted them with allegations of their participation in the insider trading schemes.

In the new investigation, three hedge funds were raided by the F.B.I. last week and several other money management companies received subpoenas or requests for information. Preet Bharara, the United States attorney for the Southern District of New York, said last week that the investigation was continuing.

These hedge fund guys think they're untouchable - the new Al Capones.

It will be fantastic to see some of them go to jail for their crimes.

And if one or two of these wiretap investigations puts an ed deformer or two behind bars, so much the better.

Better look out, Geoffrey!

You're guy might be going down with those wiretaps.

Perfect Christmas Gift For The Hedge Fundie In Your Life

It's almost Christmas and the folks on Wall Street are living it up again.

Corporate profits in the last quarter were the highest ever.

Unlimited expense accounts, no-interest loans from the boss, generous year-end bonuses for current employees, signing bonuses for new employees, low taxes and politicians like Little Andy Cuomo and Chris Christie promising to make them even lower for really, really rich people - life is good on Wall Street.

In fact, the NY Times reports this morning that the swagger is back on Wall Street and Wall Street Elites are spending more than they were even before the '08 crash.

But there is one dark cloud on the horizon.

The Wall Street Journal and other news outlets have reported that the largest insider trading investigation ever is about to break.

Three hedge funds have been raided in connection with this investigation.

Even venerable (all right, execrable) Goldman Sachs is under investigation for fraud.

So amid all the good news on Wall Street this holiday season, there is some bad.

That's why Brooks Brothers has just put out the perfect Christmas gift for the hedge fundie in your life who might be a target of an insider trading investigation.

Don't let your loved fundie get scapegoated for the criminal activity his boss had him doing - get him something from the Brooks Brothers Wired Collection instead:


Hedge fund criminals like Whitney Tilson DO have it all in this life.

But I bet most of them don't have this yet.

WSJ: The Raids On Three Hedge Funds "Sent Shock Waves" Through The Financial World

Gee - maybe the masters of the universe can get scared about something:

A three-year insider-trading investigation shifted into high gear Monday as government agents raided the offices of three large hedge funds, sending shock waves through the financial world.

...

The raids helped push the Dow Jones Industrial Average down about 150 points before a rally left the index down 24.97 points. Financial stocks were hit, with Goldman Sachs Group Inc. down 3.4% following news that investigators also were examining whether Goldman bankers had leaked information about deals. Goldman declined to comment.

The Dow recovered, but it's interesting to see that the prospect of handcuffs and perp walks can still scare the hedge fundies and banksters.

FBI Raids Three Hedge Funds In Insider Trading Scandal

The insider trading investigation seems to be ongoing:

The Federal Bureau of Investigation has raided three hedge funds in what one of the targets is calling a wide-ranging probe of insider trading in the financial industry.

Bureau employees searched the New York offices of Level Global Investors LP, and the Stamford, Conn. headquarters of Diamondback Capital Management LLC, a law enforcement official said. The official spoke on condition of anonymity because he was not authorized to discuss an ongoing case.

Another FBI official said the agency also searched a third site, at 30 Federal St. in Boston. Hedge fund Loch Capital Management LLC has its headquarters at that address.

The FBI said in a statement that it had executed search warrants in the three states "in an ongoing investigation." Agency spokesmen said they could not comment further because the court documents are under seal.

...

Diamondback and Level Global both are run by former managers of SAC Capital Advisors LP, of Stamford, Conn. Diamondback manages about $4.71 billion, according to public filings. Level Global manages $3.09 billion, filings show.

Loch Capital is run by brothers Timothy and Todd McSweeney. The brothers have been linked in news reports to hedge-fund manager Steven Fortuna. Fortuna pleaded guilty last year to charges stemming from an earlier insider trading investigation by the Securities and Exchange Commission.

The raids come a month after U.S. Attorney Preet Bharara in Manhattan told the New York City Bar Association that white-collar crime was on the rise, carried out by Wall Street heavyweights who consider inside information "a performance enhancing drug that provides the illegal 'edge' to outpace their rivals and make even more money."

Bharara said his office and the FBI had both recently added more resources to exposing insider trading and considered it a top criminal priority.

"Disturbingly, many of the people who are going to such lengths to obtain inside information for a trading advantage are already among the most advantaged, privileged, and wealthy insiders in modern finance," he said last month.

That last comment from Bharara is quite telling - "Disturbingly, many of the people who are going to such lengths to obtain inside information for a trading advantage are already among the most advantaged, privileged, and wealthy insiders in modern finance."

That seems to be the problem all across the board.

They've already got more money, material goods and power than God, but they want more, more, more.

So they're coming for teachers' salaries and pensions and health care plans.

Because they need more, more, more.

Alcoholics Anonymous, a 12 step program developed to help alcoholics deal with the craving of more, more, more alcohol, was famously started after the binge of the 1920's went bust in the 1930's.

You know what we need now - a 12 step program for financial excess for all these people who need more, more, more despite having it all already.

Seriously, the craving that these financial gluttons suffer from comes from the same place the craving alcoholics suffer over alcohol.

And just like drunks don't get sober until they hit bottom, it looks like most of these hedge fund types won't give up the greed until they get caught on a wiretap or carted out in a perp walk.

I ought to add that the same might be said for our modern American society where the only thing that seemed to be privileged and valued these days is financial trading and bankster activity.

Actually doing a trade or a, uh, real job isn't much valued anymore.

So let's add American society to the list of WHO NEEDS FINANCIAL GREED REHAB?

Maybe if this insider trading scandal is as big as has been advertised, we'll hear some more calls for this kind of change.

But I doubt it.

WSJ: Insider Trading Investigation Focuses On Bankers, Hedge Fundies

This I like:

Federal authorities, capping a three-year investigation, are preparing insider-trading charges that could ensnare consultants, investment bankers, hedge-fund and mutual-fund traders and analysts across the nation, according to people familiar with the matter.

The criminal and civil probes, which authorities say could eclipse the impact on the financial industry of any previous such investigation, are examining whether multiple insider-trading rings reaped illegal profits totaling tens of millions of dollars, the people say. Some charges could be brought before year-end, they say.

The investigations, if they bear fruit, have the potential to expose a culture of pervasive insider trading in U.S. financial markets, including new ways non-public information is passed to traders through experts tied to specific industries or companies, federal authorities say.

One focus of the criminal investigation is examining whether nonpublic information was passed along by independent analysts and consultants who work for companies that provide "expert network" services to hedge funds and mutual funds. These companies set up meetings and calls with current and former managers from hundreds of companies for traders seeking an investing edge.

Among the expert networks whose consultants are being examined, the people say, is Primary Global Research LLC, a Mountain View, Calif., firm that connects experts with investors seeking information in the technology, health-care and other industries. "I have no comment on that," said Phani Kumar Saripella, Primary Global's chief operating officer. Primary's chief executive and chief operating officers previously worked at Intel Corp., according to its website.

In another aspect of the probes, prosecutors and regulators are examining whether Goldman Sachs Group Inc. bankers leaked information about transactions, including health-care mergers, in ways that benefited certain investors, the people say. Goldman declined to comment.

Any time I see the words "Goldman Sachs," "investigation," and "criminal charges" in the same sentence, I smile.

The only thing that would make me happier is to see the words "Geoffrey" and "Canada" added to that sentence.

Mr. Canada, of course, has made a career of taking money from these crooks to use for his "charity" work.

If you take money from crooks knowing they're crooks, does that make you a crook too?