By Dave Michaels
WASHINGTON -- A former Bank of America Corp. employee and
several friends at prominent Wall Street firms face criminal
insider-trading charges over tips about potential mergers gleaned
from a confidential deals database.
Prosecutors unveiled charges against seven people, including
Daniel Rivas, a former information technology consultant at Bank of
America. Mr. Rivas is alleged to have passed on information from
the database to friends, including his girlfriend's father, James
Moodhe, according to an indictment made public Wednesday.
The group that traded on the information earned over $5 million
by trading in more than two dozen stocks, including shares of
Monsanto Co., Cabela's Inc., ADT Corp., according to the
indictment.
Mr. Rivas and Mr. Moodhe pleaded guilty in Manhattan federal
court last week, according to prosecutors who announced the pleas
on Wednesday. A spokesman for Bank of America said Mr. Rivas was
fired in April and that the bank cooperated fully with the
government probes.
Mr. Moodhe, a former treasurer and assistant controller at
interdealer broker Tullett Prebon Financial Services LLC, reaped
more than $2 million in profits by using Mr. Rivas's tips to trade
stocks and options of at least 25 companies, according to the
indictment. A spokesman for TP ICAP, Tullett Prebon's parent
company, confirmed that Mr. Moodhe worked there until May. The
company declined to comment on the claims against him.
Mr. Rivas, 32 years old, passed the first tip, about the pending
purchase of Covance Inc., to Mr. Moodhe in October 2014 after he
started dating Mr. Moodhe's daughter, according to a separate civil
lawsuit filed Wednesday against Mr. Rivas and the six traders by
the Securities and Exchange Commission. Soon after receiving the
information, Mr. Moodhe bought 1,000 Covance shares for a cost of
about $80,000, according to the complaint. About a week later, he
unloaded the shares for a $19,000 profit on the day the deal was
announced, according to the SEC.
Mr. Rivas later moved in with Mr. Moodhe's daughter in a house
in New Jersey, prosecutors said. As more tips came from Mr. Rivas,
Mr. Moodhe started placing more aggressive trades in call options
that pay off if a stock rises above a target price, according to
the SEC's complaint.
An attorney for Mr. Rivas didn't return a call seeking comment,
and a lawyer for Mr. Moodhe declined to comment.
Mr. Moodhe, 60 years old, also passed some of the information to
Michael Siva, a longtime friend who worked as a broker at Morgan
Stanley in New Jersey, according to the SEC complaint and records
from the Financial Industry Regulatory Authority.
The two men used code phrases to share tips over the phone and
met at diners where Mr. Moodhe "read from pieces of paper provided
to him by Rivas, which contained detailed information about
confidential impending deals," according to the indictment.
Morgan Stanley confirmed that Mr. Siva has worked at the
brokerage firm and said he has been placed on administrative
leave.
Mr. Siva, 55 years old, used the information to make trades that
earned $880,000 for his clients, according to the SEC. In one case,
Mr. Moodhe phoned Mr. Siva the day after he received information
from Mr. Rivas about Apollo Global Management LLC's $6.93 billion
acquisition of ADT Corp.
Mr. Siva purchased 2,100 shares of ADT stock for clients on Feb.
10 and 11, 2016, at about $27 a share, according to the SEC. A week
later, the deal was announced at a price of $42 a share, generating
profits of $26,400, the SEC said. Mr. Siva couldn't immediately be
reached for comment, and law-enforcement officials didn't disclose
an attorney for him.
The SEC sued all three men as well as four others who allegedly
traded on information that came from Mr. Rivas.
The SEC and prosecutors said Mr. Rivas shared tips with two of
the men, Roberto Rodriguez and Rodolfo Sablon, using an encrypted,
mobile messaging app that uses a timer to destroy messages. An
attorney for Mr. Rodriguez said his client posted a $250,000 bond
Wednesday and was released. Mr. Sablon couldn't be reached for
comment.
Mr. Rivas also shared tips with another close friend from his
childhood in New York City, according to prosecutors.
"The tippers and traders in this case are alleged to have used
various methods to try to cover their tracks, but their efforts
failed," said Steven Peikin, co-director of the SEC's enforcement
division. "These charges reflect our continued use of sophisticated
tools to detect and root out secretive and wide-reaching insider
trading schemes."
--Michael Rapoport contributed to this article.
Write to Dave Michaels at dave.michaels@wsj.com
(END) Dow Jones Newswires
August 16, 2017 19:48 ET (23:48 GMT)
Copyright (c) 2017 Dow Jones & Company, Inc.
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