Beyond Galleon: Seven Notorious Insider Trading Scandals

Oct. 27, 2011 — -- intro: The mammoth Galleon insider trading scandal has grown even bigger with the news that a prominent U.S. executive surrendered to the FBI this week to face criminal charges.

Rajat Gupta, formerly a board member at Goldman Sachs and Procter & Gamble, is accused of disclosing to Raj Rajaratam nonpublic information he learned through his board memberships. Rajaratam, the founder of Galleon Group, is serving an 11-year prison sentence for reaping nearly $64 million through illegal stock tips, prosecutors said.

If convicted, Gupta will join a number of other very high profile execs whose names will forever be linked with Wall Street's most infamous offense: insider trading.

quicklist: 1url: title: Ivan Boesky: The Real-Life Gordon Gekko?

text: In the 1980s, Wall Street's most celebrated arbitrageur would become its most infamous: Ivan Boesky was making a fortune betting on corporate takeovers until the Securities and Exchange Commission busted him on charges of insider trading, alleging his seemingly-prescient bets were actually based on illegal tips. Boesky cooperated with the SEC and implicated many of his former colleagues, allowing him to score a plea deal that included a three-year jail sentence and a $100 million fine. Boesky, who once touted greed in a speech at the University of California-Berkley, is said to be in the inspiration for the Gordon Gekko character in the 1987 film "Wall Street."

media: 14821040caption: do not userelated:

quicklist: 2url: title: Michael Milken: Still Defending Reputation, Not Convicted of Insider Trading

text: Nicknamed the "junk bond king," Milken has been blamed for being a major contributor to the 1980s savings and loan crisis -- some large savings & loans that failed held Milken bonds -- and was later indicted on insider trading and securities fraud, thanks in part to information provided to the government by Ivan Boesky. Despite commonly-held misperceptions, the insider trading charge didn't stick and Milken instead pleaded guilty to six securities and reporting violations. He paid a $200 million fine and was released from prison after less than two years. Milken and his supporters have staunchly defended his reputation, even campaigning for presidential pardons. Milken denies playing a role in the S&L crisis, arguing that junk bonds comprised a miniscule portion of savings and loans' total holdings.

media: 14821110caption: do not userelated:

quicklist: 3url: title: Martha Stewart: For Domestic Diva, ImClone Dump Not 'a Good Thing'

text: The amount of money at stake in the insider trading case of Martha Stewart is small (scalloped) potatoes compared to others on this list but Stewart has what they don't -- celebrity that came from outside the world of finance. The domestic diva dumped $230,000 in shares of the company ImClone in late 2001 after learning from her broker that the company's CEO -- Sam Waskal -- was liquidating his shares. (Waskal and Stewart had the same broker.) Waskal, who sold his shares after learning that the FDA would reject a major ImClone drug and urged family and friends to do the same, later pleaded guilty to insider trading charges; he paid a $4.3 million fine and spent five-and-a-half years in jail . In 2004, Stewart was convicted of lying to investigators about the stock sale and was incarcerated for five months.

media: 14820915caption: do not userelated:

quicklist: 4url: title: Jeffrey Skilling and the Enron Collapse

text: Last decade's Enron scandal consisted of a plethora of financial misdeeds and that included insider trading. In 2006, former Enron CEO Jeffrey Skilling was convicted of 19 criminal counts, including one count of insider trading, related to his role in the massive fraud that took place at the energy and commodities firm. Skilling was alleged to have dumped $15.5 million in Enron stock in an insider trade more than two months before the company declared bankruptcy. Skilling was sentenced to 45 years in prison and fined $45 million.

media: 14821160 caption: do not userelated:

quicklist: 5url: title: Arthur Samberg's Microsoft Millions

text: Hedge fund titan Arthur Samberg, the founder of Pequot Capital Management, paid $28 million to the SEC in 2010 to settle fraud charges after he was alleged to have asked a former Microsoft employee to provide him inside information on the company. Samberg's subsequent bets on Microsoft, the SEC argued, brought him gains of nearly $15 million. Samberg closed Pequot, once one of Wall Street's biggest hedge funds, in 2009.

media: 14821240caption: do not userelated:

quicklist: 6url: title: Joseph Nacchio and an Unfortunate Qwest

text: Qwest Communications International CEO Joseph Naccio was found guilty of 19 counts of insider trading in 2007 after selling more than $50 million in Qwest stock. Prosecutors argued that Naccio didn't tell shareholders of growing problems at the company while selling his own holdings.

media: 14821270 caption: do not userelated:

quicklist: 7url: title: The Wyly Brothers Battle SEC

text: The SEC alleged in 2010 that brothers Sam (pictured) and Charles Wyly, the billionaire founders of Michaels arts and crafts stores, engaged in insider trading in the securities of companies on which they served on corporate boards. The trading allegedly yielded them $550 million, the government has claimed. Earlier this year, the brothers sought to have the SEC's lawsuit dismissed but failed. Charles Wyly died in a car crash in August.

media: 14821480caption: do not userelated: