Pilot for Billionaire Investor Joseph Lewis Pleads Guilty to Insider Trading

Personal Pilot To Billionaire Investor Joseph Lewis Pleads Guilty To Insider Trading Scheme | DOJ/SDNY

PATRICK O’CONNOR worked as a personal pilot to his co-defendant in this case, JOSEPH LEWIS, for several years. LEWIS is a billionaire businessman and investor who is the principal owner of the Tavistock Group, an international private investment organization. At relevant times, by virtue of LEWIS’s investments in certain companies, he controlled one or more board of director seats at those companies and deputized employees to serve on various company boards. In turn, through these employees, LEWIS received material, non-public information about these companies.

During the course of his employment for LEWIS, on multiple occasions, O’CONNOR received material, non-public information from LEWIS and then traded on the basis of that information. On one occasion, after receiving inside information from LEWIS concerning Mirati Therapeutics, O’CONNOR wrote in a WhatsApp message to a friend that he had “talked with Mr. Lewis,” “we will make much more within the next 6 weeks with Mirati,” and “think we have people who know.” Days later, O’CONNOR wrote to the same friend to buy Mirati and that the “Boss[i.e., LEWIS] is helping us out and told us to get ASAP.” O’CONNOR added that “All conversations on app is encrypted so all good. No one can ever see.” A day later, O’CONNOR added in the same text thread that LEWIS said to buy Mirati stock, that Mirati “should only be short term,” and that the “Boss mentioned around 6 to 8 weeks for [Mirati] to take profit.” Within days, LEWIS wired $500,000 to O’CONNOR, and O’CONNOR then used the $500,000 to purchase Mirati stock. On or about October 22, 2019, O’CONNOR texted his same friend that October 28, 2019, was the “big day for MRTX.” O’CONNOR then added that he thought “the Boss has inside info” and “knows the outcome” because “otherwise why would he make us invest.”

Honey, I Insider-Traded Your Merger

One week later, on April 3, 2023, Loudon confessed to his wife that he had traded in TA prior to the acquisition announcement. Loudon did not tell her the number of shares he purchased or the profits he realized from their sale. Loudon told his wife that he had bought the TA shares because he wanted to make enough money so that she did not have to work long hours anymore.

“I was doing it for you!” Bad!

Stunned by this revelation, Loudon’s wife reported the trading to her supervisor at BP. In turn, BP placed her on administrative leave. BP reviewed Loudon’s wife’s emails and texts, finding no evidence that she knowingly leaked the acquisition to Loudon or otherwise knew of her husband’s trading. BP nonetheless terminated her employment.

Well, so, she’s not working long hours anymore.

***

I think that’s the worst insider trading case I’ve ever read? Between her prompt reporting to BP, their review of her texts and emails, and the immediate divorce, it seems pretty clear she wasn’t in on the insider trading. Still, terrible.

Ex-Vitol Trader Found Guilty in Connection With Ecuador, Mexico Bribe Schemes

A former Vitol commodities trader has been found guilty of charges stemming from schemes to bribe officials at state oil companies in Ecuador and Mexico.

A jury in federal court in Brooklyn, N.Y., on Friday found Javier Aguilar guilty on three counts, including a charge of violating the Foreign Corrupt Practices Act and of conspiring to launder money. The verdict came after a trial lasting about eight weeks.

“We disagree with the jury’s verdict and intend to appeal,” said Daniel Koffmann, a lawyer for Aguilar.

Prosecutors alleged that Aguilar, a Mexican citizen who worked as a trader for Vitol in Houston from 2015 to 2020, paid bribes to officials in Ecuador via intermediaries. The firm was able to secure a contract to buy about $300 million in fuel oil from state-owned Petroecuador, prosecutors said.

FCA plans to name firms under investigation in UK deterrence drive

The UK Financial Conduct Authority is planning to name firms under investigation more frequently and at a much earlier stage in an effort to increase the deterrence effect such probes can have on the market.

***

The FCA has historically published very little about its investigations until they are resolved through penalties such as fines or criminal charges, only commenting in “exceptional circumstances”, said Chambers, who took up her role last April.

Under the new approach, the regulator would adopt a looser “public interest” test in the hope that naming entities under investigation would encourage witnesses and whistleblowers to come forward.

Florida Man Sentenced to 30 Months for Investment Fraud Scheme

Miami resident, Jack Connor Ridall, has been sentenced to 30 months in prison for executing an investment fraud scheme, according to the Justice Department Monday.

Ridall, who operated Stratcapital LLC, Guss Capital LLC, and Guss Actium Manager LLC, defrauded at least three people out of $735,000 by falsely claiming to use their money for investments.

However, Ridall actually used the funds to pay for luxury retail purchases, hotel stays, restaurants, and transfers to family members, said the DOJ.

SPACs Poised to Turn a Corner in 2024: Annual Risk Update

We saw a few new types of lawsuits in 2023. The most interesting takeaway is that there were several suits against SPAC advisors.

For example, in May of 2023, a suit was filed in Delaware Chancery Court in connection with the Lottery.com SPAC deal. The lawsuit named not only SPAC directors and officers but also the financial advisor involved with the deal, Chardan Capital Markets, LLC. The lawsuit alleges that the defendants, including Chardan, breached their fiduciary duties by approving due diligence that should have revealed that the deal was not a great one.

And, as mentioned above, we are seeing an increase in the frequency of the direct-action breach of fiduciary duty suits being filed in Delaware, with several being dismissed but many proceeding forward.

Wall Street’s Latest Pitch Is a Contradiction: Private IPOs

Private-equity firms are desperate to cash out of investments. But enthusiasm for initial public offerings is low after several stock-market debuts flopped.

Enter so-called private IPOs.

The concept is being bandied about on Wall Street as investors and bankers search for ways to keep the money flowing. The contradictory moniker refers to stock sales in which early backers privately sell to longer-term investors such as mutual funds or sovereign-wealth funds, sidestepping the traditional IPO process.

Emerging Expectations: The Board’s Role in Oversight of Cybersecurity Risks

Board and Senior Executive Cyber Risk and Disclosures Checklist

The rules and the SolarWinds case suggest certain basic steps boards should take.

— Evaluate internal controls: The SolarWinds action underscores the need for companies to scrutinize internal controls relating to cybersecurity. Regulators, customers and the market expect certain market-standard security practices, like NIST. Companies should develop mechanisms for assessing and elevating issues and ensure that internal cybersecurity weaknesses are promptly addressed, given adequate resources and are promptly brought to the attention of counsel responsible for disclosures. Third-party testing and assessments are critical to identifying gaps in those controls and processes….

Compare and Contrast

NERA Economic Consulting and Cornerstone Research have released their respective 2023 annual reports on federal securities class action filings. As usual, the different methodologies employed by the two organizations have led to slightly different numbers, although they both identify the same general trends.