U.S. authorities have charged a former research analyst at a financial services firm with insider trading offenses related to the 2009 acquisition of software vendor SPSS by IBM.
Australian Trent Martin, 33, is charged with one count of conspiracy to commit securities fraud and one count of securities fraud, the U.S. Department of Justice announced. The charges against Martin were unsealed Wednesday in U.S. District Court for the Southern District of New York.
Martin is accused of conspiring with stock brokers Thomas Conradt and David Weishaus after he learned of IBM's plans to buy SPSS from a lawyer who represented IBM in the deal, the DOJ said in a press release. Martin, Conradt, Weishaus and their co-conspirators allegedly traded on the basis of nonpublic information and earned more than US $1 million in profits, the agency said.
Martin was arrested Saturday in Hong Kong at the request of U.S. authorities. Conradt and Weishaus, arrested earlier, pleaded not guilty on Dec. 7.
The IBM lawyer, unnamed in the DOJ's materials, told his close friend Martin on May 31, 2009, that IBM planned to acquire SPSS and pay significantly more than the software vendor's market price, the DOJ said. The lawyer, sharing the information in confidence, did not expect Martin to spread the information or use it to trade, the agency said.
In June 2009, Martin bought SPSS common stock based on the inside information and shared the tip with his roommate, Conradt, who worked as a stock broker at a securities trading firm, the DOJ alleged. Conradt then bought SPSS common stock and tipped Weishaus, his co-worker, the DOJ said. On June 24, 2009, Weishaus started buying call option contracts in SPSS.
Conradt and Weishaus also tipped off their co-workers, who also bought SPSS call option contracts in June and July 2009, the DOJ said.
In instant messages exchanged in July 2009, Conradt and Weishaus discussed their insider trading scheme, the DOJ said. Conradt, in a July 1, 2009, instant message, said they should not share the information, but keep it "in the family."
Weishaus answered, "Dude, no way. I don't want to go to jail."
When IBM announced its acquisition of SPSS on July 28, 2009, the share price of SPSS common stock rose by 41 percent in one day, from the prior day's closing price of $35.09 per share to a closing price of $49.45 per share. Martin, Conradt, Weishaus, and two other conspirators then sold their SPSS positions, yielding profits ranging from $2,538 for Conradt to $629,954 for an unnamed conspirator.
Martin made $7,900 by selling his SPSS shares, the DOJ said.
Martin left the U.S. after the U.S. Securities and Exchange Commission, in 2010, began investigating insider trading in the deal.
The conspiracy charge against Martin carries a maximum potential penalty of five years in prison and a $250,000 fine. The securities fraud charge carries a maximum potential penalty of 20 years in prison and a $5 million fine.
Grant Gross covers technology and telecom policy in the U.S. government for The IDG News Service. Follow Grant on Twitter at GrantGross. Grant's e-mail address is firstname.lastname@example.org.