DEFENDANT IN INSIDER TRADING CASE INVOLVING AMATEUR GOLFERS PLEADS GUILTY

FROM:  U.S. SECURITIES AND EXCHANGE COMMISSION 

Litigation Release No. 23264 / May 18, 2015

Securities and Exchange Commission v. Eric McPhail, et al., Civil Action No. 1:14-cv-12958 (District of Massachusetts, Complaint filed July 11, 2014)

United States v. Eric McPhail and Douglas Parigian, 1:14-cr-10201-DJC (District of Massachusetts filed July 9, 2014).

Defendant in SEC Insider Trading Case Involving Group of Amateur Golfers Pleads Guilty to Criminal Charges

The Securities and Exchange Commission announced that, on May 13, 2015, Douglas Parigian pleaded guilty to criminal charges of conspiracy and securities fraud for his role in an insider trading ring involving trading in the stock of Massachusetts-based American Superconductor Corporation. The criminal charges against Parigian arose out of the same fraudulent conduct alleged by the Commission in a civil securities fraud action filed against Parigian and others in July 2014.

On July 9, 2014, the U.S. Attorney's Office for the District of Massachusetts indicted Parigian and another defendant, Eric McPhail, for conspiracy and securities fraud and, for Parigian only, lying to FBI agents. The U.S. Attorney charged that McPhail had a history, pattern and practice of sharing confidences with a senior executive at American Superconductor. Between 2009 and 2011, the senior executive provided McPhail with material, nonpublic information concerning the company's quarterly earnings and other business activities (the "Inside Information") with the understanding that it would be kept confidential. Instead, McPhail used email and other means to provide the Inside Information to his friends, including Parigian, with the intent that they profit by buying and selling American Superconductor stock and options. Parigian used the Inside Information to profit on the purchase and sale of American Superconductor stock and options.

On July 11, 2014, the Commission filed a civil injunctive against Eric McPhail and six of his golfing buddies, including Parigian, alleging that McPhail repeatedly provided them with material nonpublic information about American Superconductor. According to the Commission's Complaint, McPhail's source of the information was an American Superconductor executive who belonged to the same country club as McPhail and was a close friend. The Complaint further alleged that, from July 2009 through April 2011, the executive told McPhail about American Superconductor's expected earnings, contracts, and other major pending corporate developments, trusting that McPhail would keep the information confidential. McPhail instead misappropriated the information and tipped his friends, who improperly traded on the information. Without admitting or denying the allegations, four defendants settled the SEC's charges by consenting to the entry of judgments permanently enjoining them from violating the antifraud provisions of the Securities Exchange Act of 1934, paying disgorgement and civil penalties. The SEC's case against Parigian, McPhail and another individual, Jamie Meadows, is ongoing.

FORMER BOA EXEC SENTENCED TO SERVE 26 MONTHS IN PRISON FOR CONSPIRACY AND FRAUD

FROM:  U.S. JUSTICE DEPARTMENT

FORMER BANK OF AMERICA EXECUTIVE SENTENCED TO SERVE

26 MONTHS IN PRISON FOR ROLE IN CONSPIRACY AND FRAUD INVOLVING INVESTMENT CONTRACTS FOR MUNICIPAL BOND PROCEEDS

WASHINGTON — A former Bank of America executive was sentenced today for his participation in a conspiracy and scheme to defraud related to bidding for contracts for the investment of municipal bond proceeds and other municipal finance contracts, the Department of Justice announced today.                                                                    

Phillip D. Murphy, the former managing director of Bank of America’s municipal derivatives group from 1998 to 2002, was sentenced to serve 26 months in prison by U.S. District Judge Max O. Cogburn Jr. of the U.S. District Court of the Western District of North Carolina.

On Feb. 10, 2014, Murphy pleaded guilty to participating in multiple fraud conspiracies and schemes with various financial institutions and brokers from as early as 1998 until 2006.  Bank of America and other financial institutions, acting as “providers,” offered a certain type of contract – known as an investment agreement – to state, county and local governments and agencies, and not-for-profit entities, throughout the United States.  These public entities sought to invest money from a variety of sources, primarily the proceeds of municipal bonds that they had issued to raise money for, among other things, public projects.  Public entities typically hire a broker to assist them in investing their money and to conduct a competitive bidding process to determine the winning provider.

“Individual accountability is the cornerstone of protecting the integrity of our financial markets,” said Deputy Assistant Attorney General Brent Snyder of the Antitrust Division’s Criminal Enforcement Program.  “This sentence is a result of our continued resolve to vigorously prosecute bank executives whose greed and illegal schemes undermine our free and fair financial markets.”

According to court documents, Murphy conspired with employees of Rubin/Chambers Dunhill Insurance Services Inc., also known as CDR Financial Products, a broker of municipal contracts, and others.  Murphy also pleaded guilty to conspiring with others to make false entries in the reports and statements originating from his desk, which were sent to bank management.  Murphy conspired with CDR and others to increase the number and profitability of investment agreements and other municipal finance contracts awarded to Bank of America.  Murphy won investment agreements through CDR’s manipulation of the bidding process in obtaining losing bids from other providers, which is explicitly prohibited by U.S. Treasury regulations.  As a result, various providers won investment agreements and other municipal finance contracts at artificially determined prices.  Murphy also submitted intentionally losing bids for certain investment agreements and other contracts when requested, and, on occasion, agreed to pay or arranged for kickbacks to be paid to CDR and other co-conspirator brokers.

In conjunction with the bid rigging, Murphy and his co-conspirators submitted numerous intentionally false certifications that were relied upon by both municipalities and the Internal Revenue Service (IRS).  These false certifications misrepresented that the bidding process had been conducted in a competitive manner that was in conformance with U.S. Treasury regulations.  These false certifications caused municipalities to award contracts to Bank of America and other providers based on false and misleading information.  The false certifications also impeded and obstructed the ability of the IRS to collect revenue owed to the U.S. Treasury.

“We trust those in positions of leadership and power to do the right thing when it comes to taking care of our money,” said Chief Richard Weber of the IRS’s Criminal Investigation.  “When that trust is broken through these types of criminal activities, than those individuals need to be held accountable.  Today's sentencing reflects our commitment to ensuring fairness for those engaged in these types of investments.”

“By knowingly exploiting vulnerabilities in the bidding process, Murphy ignored policies put in place to allow for the ethical distribution of municipal bond proceeds,” said Assistant Director in Charge Diego Rodriguez of the FBI’s New York Field Office.  “In the end, he brokered a deal that served his own best interests.  Today’s sentence is proof of our continued determination to root out those whose business practices contribute to the deterioration of healthy competition in the municipal bidding process.”

Including Murphy, 17 individuals and one corporation have been convicted or pleaded guilty as a result of the Antitrust Division’s municipal bonds investigation.

The sentence announced today resulted from an investigation conducted by the Antitrust Division’s New York Office, the FBI and IRS-CI.  The division also coordinated its investigation with the U.S. Securities and Exchange Commission, the Office of the Comptroller of the Currency and the Federal Reserve Bank of New York.  The U.S. Attorney’s Office of the Western District of North Carolina provided valuable assistance in this matter.

The charges were brought in connection with the President’s Financial Fraud Enforcement Task Force.  The task force was established to wage an aggressive, coordinated and proactive effort to investigate and prosecute financial crimes.  With more than 20 federal agencies, 94 U.S. attorneys’ offices, and state and local partners, it’s the broadest coalition of law enforcement, investigatory and regulatory agencies ever assembled to combat fraud.  Since its formation, the task force has made great strides in facilitating increased investigation and prosecution of financial crimes; enhancing coordination and cooperation among federal, state and local authorities; addressing discrimination in the lending and financial markets; and conducting outreach to the public, victims, financial institutions and other organizations.  Over the past three fiscal years, the Justice Department has filed nearly 10,000 financial fraud cases against nearly 15,000 defendants, including more than 2,900 mortgage fraud defendants.

SEC ANNOUNCES ARREST OF MAN FOR ROLE IN INSIDER TRADING CASE INVOLVING A TIP

FROM:  U.S. SECURITIES AND EXCHANGE COMMISSION 

Litigation Release No. 23131 / November 14, 2014

USA v. Robert H. Bray, Case No. 1:14-MJ-5119-JGD in the United States District Court for the District of Massachusetts

USA v. John Patrick O'Neill, Case No. 1:14-cr-10317-WGY in the United States District Court for the District of Massachusetts

Securities and Exchange Commission v. J. Patrick O'Neill and Robert H. Bray, Civil Action No. 1:14-cv-13381 (District of Massachusetts, Complaint filed August 18, 2014)

Boston-Area Defendant in SEC Insider Trading Case Faces Criminal Charges

The Securities and Exchange Commission announced that on November 12, 2014, Robert H. Bray ("Bray") was arrested by the Federal Bureau of Investigation and charged by a criminal complaint with participating in an insider trading conspiracy for trading in the stock of Wainwright Bank & Trust Company ("Wainwright") based on a tip he received from a friend.

The Commission previously charged Bray and J. Patrick O'Neill ("O'Neill") with insider trading in a civil action filed on August 18, 2014. The criminal charges are based on the same conduct underlying the SEC's action. The SEC's complaint alleged that O'Neill, a former senior vice president at Eastern Bank Corporation, learned through his job responsibilities that his employer was planning to acquire Wainwright. According to the SEC's complaint, O'Neill tipped Bray, a friend and fellow golfer with whom he socialized at a local country club. In the two weeks preceding a public announcement about the planned acquisition, Bray sold his shares in other stocks to accumulate funds he used to purchase 31,000 shares of Wainwright. After the public announcement of the acquisition caused Wainwright's stock price to increase nearly 100 percent, Bray sold all of his shares during the next few months for nearly $300,000 in illicit profits.

The Commission also announced that on October 31, 2014, the United States Attorney's Office for the District of Massachusetts filed a criminal Information against O'Neill. The criminal Information charges O'Neill with one count of conspiracy to commit securities fraud. O'Neill was initially charged by a criminal complaint when he was arrested in August 2014.

The SEC's action, which is pending, seeks injunctions against each of the defendants from further violations of the charged provisions of the federal securities laws, disgorgement of ill-gotten gains, and civil penalties.

FORMER BROKER SENT TO PRISON FOR FOGUE TRADES

FROM:  U.S. SECURITIES AND EXCHANGE COMMISSION 
Former Rochdale Securities Broker Sentenced to 30 Months' Imprisonment for Rogue Trades

The Securities and Exchange Commission announced today that on November 19, 2013, the Honorable Robert N. Chatigny of the United States District Court for the District of Connecticut sentenced David Miller, 41, of Rockville Center, New York, to 30 months imprisonment, followed by three years of supervised release, for his role in a fraudulent scheme to place a series of unauthorized purchases of more than 1.6 million shares of Apple, Inc. stock on October 25, 2012 while employed as an institutional sales trader for Rochdale Securities LLC ("Rochdale") of Stamford, Connecticut. Judge Chatigny also ordered Miller to make full restitution to Rochdale, which suffered a loss of $5,292,202.50 and ceased all business operations as a result of Miller's actions. Miller was arrested on December 4, 2012, and on April 15, 2013 he pleaded guilty to one count of conspiracy to commit wire fraud and securities fraud, and one count of wire fraud.

On April 15, 2013, the Commission filed a partially settled civil injunctive action against Miller in federal court in Connecticut arising out of the same conduct. To settle the Commission's charges, Miller consented to be enjoined from future violations of the antifraud provisions of the federal securities laws. The amount of a civil monetary penalty will be determined at a later date. In related administrative proceedings that the Commission separately instituted on April 25, 2013, Miller consented to a Commission Order barring him from any future association with any broker, dealer, investment adviser, municipal securities dealer, municipal advisor, transfer agent, or nationally recognized statistical rating organization, and barring him from participating in any offering of penny stock.