Advertisement

2 plead guilty to insider trading

Share
From Times Wire Services

A former UBS executive and an ex-hedge fund trader both pleaded guilty to participating in an insider trading scheme that involved leaks of upcoming changes in stock ratings by the firm’s analysts.

Mitchel Guttenberg, who was an institutional client manager in UBS’ equity research department in New York, said he gave tips about hundreds of imminent stock upgrades or downgrades to two hedge fund traders, including David Tavdy, who also pleaded guilty Wednesday.

The traders paid Guttenberg hundreds of thousands of dollars for the information, he told U.S. District Judge Deborah Batts in federal court in New York.

Advertisement

Guttenberg, 42, and Tavdy, 39, pleaded guilty to fraud and conspiracy. Guttenberg faces as much as eight years in prison when he is sentenced June 2. Tavdy could get as much as 6 1/2 years at his June 30 sentencing.

The former hedge fund manager told Batts he made 1,100 trades based on information from Guttenberg.

Guttenberg said he began leaking rating changes after he was named in 2001 to UBS’ investment review committee, which examined proposed upgrades and downgrades. He provided the illegal tips until 2006.

Assistant U.S. Atty. Andrew Fish said Tavdy and a firm where he worked, Jasper Capital, made more than $10 million from the inside information.

Erik Franklin and his employer, Chelsea Capital, earned more than $7.5 million. Franklin, who also managed hedge fund money for Bear Stearns Cos., has pleaded guilty in the case.

Last week, in a related insider trading case, former Bank of America broker Paul Risoli was sentenced to seven months in prison for taking $12,500 in bribes from Franklin in exchange for shares of initial public offerings. In May, a former Morgan Stanley compliance officer, Randi Collotta, admitted that she tipped off her husband to news of coming deals.

Advertisement

Jasper Capital, where Tavdy worked, was a day trading firm run by David Glass, who has also pleaded guilty. A representative of Chelsea Capital couldn’t be reached for comment.

The remaining defendant, broker Samuel Childs, has pleaded not guilty. He is scheduled for trial in April.

Advertisement