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September 24, 2013 at 08:58 AM
Insider trading cases have grabbed the headlines over the last few years, shaking hedge funds, the financial world and even celebrities.
In fact, in the last five years, there have been more than 70 convictions for insider trading in the U.S. The list of individuals and companies caught up in the crackdown by the SEC and the Justice Department seems almost endless, from SAC Capital to Raj Rajaratnam.
Is it any wonder that 70% of Americans think those who work on Wall Street would break the law just to earn a lot money, Knut Rostad writes in his blog on ThinkAdvisor: 5 Years On, Americans See Wall St. as “Foreign … a Culture Apart”.
Of course, the urge to use a little secret info to make a mint is nothing new. When ThinkAdvisor went to compile a who’s who of insider trading miscreants, it wasn’t hard to find cases from the 1990s, the 1980s and one we couldn’t resist from way back in the Roaring ’20s, though he wasn’t convicted.
Check out our Top 11 Wall St. Crooks: Insider Trading. We’ve counted them down from the lowest to highest amount stolen in terms of 2013 dollars.
(Honorable Mention, since everything he did was legal, but he had a law named after him–in a bad way)
Albert H. Wiggin: $4 million ($54.7 million today) in 1929
Kind of like the modern godfather/figurehead of insider trading, Wiggin is the one man on our list who got away with his “crime.” Still, his misdeeds created such public outrage that the practice of shorting your own company’s stock provoked the passage of a namesake law outlawing it, thw Wiggins Act. Wiggin, the head of Chase National Bank, shorted 40,000 shares in the company, giving him every reason to see the bank fail. October 1929 might have been a black month for most investors, but Wiggin made out like, well, a bandit. Looking for a place to vent its anger, the public settled on Wiggin. Although, at the time what he did wasn’t illegal, public pressure forced Wiggin to forgo his $100,000 ($1.3 million today) annual pension. And his name does live on in the law books.
10. Marilyn Star, $88,135 ($128,000 today) in 1997-98
She might be at No. 10 on our list, but Marilyn Star is our favorite insider trader. After all, she is the only porn star we’ve come across who was convicted of illicit stock trading. Star, who was born Kathryn Gannon, first came to public notice in a series of X-rated films in the early ’90s. That work led to high-end strip club appearances. After a divorce she started “dating” James McDermott, a banking exec with Keefe, Bruyette & Woods. A little pillow talk later and Star had some insider information about bank mergers with which to purchase stocks. In 2002, she pleaded guilty to insider trading charges and served three months in prison. She has been quoted as saying she was a naive young woman who listened to an older man. McDermott pleaded guilty to stock fraud, served five months in jail and agreed to pay $230,000 to victims of the scheme.
9. Martha Stewart: $280,000 ($360,000 today) in 2004
No list of insider trading cases would be complete without the queen of baking, home decorating and crafts products. Stewart created a cottage industry around her television show and magazine that seemed unstoppable. Unstoppable until she was charged with insider trading in 2004. The amount involved might be chump change – $280,000 worth of ImClone stock – but the media attention on the case was around the clock. Stewart spent five months in prison and agreed to a ban on serving on the boards of public companies in 2006 and paid $195,000 ($226,000 today) in fines and penalties. The ban ended in 2011 and she returned to the head of her namesake company. After her stint in the big house, Stewart maintained her sense of humor, exchanging barbs with David Letterman about her time away.
8. Donald Johnson: $755,000 ($846,000 today) in 2007
Being an executive of a stock exchange ought to fund a very nice lifestyle, but that apparently wasn’t enough for the Nasdaq’s chief, Donald Johnson. Johnson was convicted in 2011 of using insider information to trade shares of United Therapeutics, Honda and other companies from 2006 to 2009. Johnson’s job on the market intelligence desk made him privy to all kinds of secrets that could move markets. He used the info to hi advantage and, ultimately, to his detriment. He pleaded guilty to one count of insider trading and was sentenced to three and a half years in prison and ordered to make restitution. The Wall Street Journal reported that after his arrest Johnson said he was gratified by support he received from colleagues and would not ask them to write letters to the court on his behalf. What a guy.
