CVS CVS Health Corporation

By Nicole Hong 

A former Barclays PLC director was arrested Tuesday morning in New York and accused of feeding insider-trading tips to his plumber in exchange for a free bathroom remodeling and cash, according to criminal and civil authorities.

Steven McClatchey, 58 years old, was a former employee at Barclays, the bank confirmed. Prosecutors said he worked for seven years at the Manhattan office of Barclays, where he was responsible for tracking the bank's involvement in potential mergers and acquisitions. He distributed a weekly document to select Barclays employees called "M&A Global Weekly Business Update," which included deals that were likely to become public the following week.

Government officials allege Mr. McClatchey gave tips to his friend and plumber, Gary Pusey, ahead of more than 10 separate mergers and acquisitions before they became public, including deals involving PetSmart Inc., CVS Health Corp. and Duke Energy Corp.

The plumber allegedly paid Mr. McClatchey, in part, by remodeling his bathroom for free.

Mr. Pusey, 47, pleaded guilty last Friday to his participation in the alleged scheme and has been cooperating with the government, according to the criminal complaint filed by the Manhattan U.S. attorney's office, which charged Mr. McClatchey with conspiracy, wire fraud and securities fraud. The Securities and Exchange Commission also filed civil insider-trading charges against the two men.

Lawyers for Mr. McClatchey and Mr. Pusey didn't immediately respond to requests for comment.

Barclays, which is described in the complaint only as "Investment Bank A, " said it has cooperated with the government "since learning about this incident involving a former employee." Mr. McClatchey worked in a back-office role and didn't interact directly with clients, according to a person familiar with the matter.

Mr. Pusey had about $76,000 in ill-gotten gains from the inside information, prosecutors said. When the tips were successful, Mr. Pusey paid Mr. McClatchey by giving him cash in a gym bag or by handing cash to him directly in his garage, according to the complaint.

The two men became friends about four years ago, when they met at the Long Island marina where they both docked their boats, according to prosecutors. They began to spend most Saturdays together, the complaint said.

The first tip Mr. McClatchey gave Mr. Pusey came around 2013 or 2014, when Mr. McClatchey allegedly told the plumber to "keep an eye on a particular company because something good was going to happen," according to the complaint. Based on the tips, Mr. Pusey bought securities in at least 11 companies, prosecutors said.

In one instance, Barclays in early 2014 began discussing the possibility of representing Sabine Oil & Gas LLC in a deal with Forest Oil Corp. Prosecutors alleged that as Mr. McClatchey fed tips of the deal, Mr. Pusey bought about $23,000 in Forest Oil shares. When Sabine and Forest Oil ultimately signed the merger agreement, Forest Oil's stock rose 13.4% from the close of the prior trading day.

--Max Colchester contributed to this article.

Write to Nicole Hong at nicole.hong@wsj.com

(END) Dow Jones Newswires

June 01, 2016 02:47 ET (06:47 GMT)

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