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IBM's SPSS buyout: FBI cuffs two on insider trading charges

Stockbrokers deny inside dealing

Internet Security Threat Report 2014

Two stockbrokers have been arrested and charged with insider trading related to IBM’s £1.2bn acquisition of software firm SPSS in 2009, after three others pleaded guilty.

Daryl Payton Jr and Benjamin Durant III have both claimed innocence in the face of charges of conspiracy and securities fraud after being arrested by the FBI in New York yesterday. Both men have also been charged with insider trading by the Securities and Exchange Commission, which wants to recover $300,000 from the two.

News of the acquisition reached traders ahead of the public announcement of the deal through a convoluted game of pass the parcel, according to prosecutors. Payton and Durant were tipped off by Thomas Conradt, it is claimed, a friend and fellow broker who also let previously charged trader David Weishaus know about the deal. Conradt heard about it from his roommate Trent Martin, a research analyst who got the information from an attorney working on the case.

The lawyer told Martin about the deal, including the anticipated transaction price, but expected him to keep it confidential. Instead, say the prosecution, Martin passed the information along.

Conradt, Weishaus and Martin have all settled with the SEC and pleaded guilty to criminal charges in the case.

Durant and Payton have pleaded not guilty to criminal charges in the case, but the SEC said that the pair were in on the conspiracy.

“Durant and Payton were licensed professionals who knowingly disregarded insider trading laws to enrich themselves at the expense of investors,” alleged Sharon Binger, director of the SEC’s Philadelphia Regional Office.

The commission and US Attorney Preet Bharara allege that on top of the insider trading, Durant and Payton even met with others at a Manhattan hotel to talk over what to do if the Feds caught up with them.

“Benjamin Durant and Daryl Payton not only acquired inside information about a corporate acquisition and made illegal profits from it, but they colluded with others to conceal their crime, even holding a secret meeting at a hotel the night the acquisition was announced to devise their cover-up plan,” Bharara said in a statement. “This kind of dishonesty is profitable only in the short run, ultimately leading to arrest and prosecution.”

FBI assistant director-in-charge George Venizelos went on to claim that Durant and Payton had both lied when asked about their illegal trading.

“The integrity and fairness of our financial markets are paramount. It’s a matter of national security,” he said. “We will police this type of illegal behaviour and make as many arrests as necessary until people stop cheating and ripping off others to get ahead.”

A trial date has yet to be set. Both Durant and Payton intend to contest the charges. ®

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