CFE to Sit on Panel of Experts Discussing Insider Trading Documentary

CFE to Sit on Panel of Experts Discussing Insider Trading Documentary

Kelly Ohayon, CFE, CPA, CA, and MD of Financial Governance and Controls at BMO Financial Group, will sit on a panel of experts at an upcoming screening of Collared, a new documentary produced with the support of the Fund for Innovation in Law and Media (FILM) established at Osgoode Hall Law School of York University, as well as in partnership with the Hennick Centre for Business and Law. The screening and panel discussion will be at the HotDocs Ted Rogers Cinema, September 20 in Toronto and will offer attendees 2 hours of CPE.

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Episode Notes for Fraud Talk Podcast: Loose Lips Sink Ships


Emily Primeaux, CFE
Associate Editor, Fraud Magazine

Andrew Snyder has worked in the criminal justice system for more than 30 years, starting as a correctional officer for the California Department of Corrections. He recently told me in a Fraud Talk podcast interview that this first job within the prison system is what inspired him to “mentor” white-collar criminals before they served their prison sentence.

“I’ve interviewed some of these people who have been in the media because of the noteriaty of their cases to give others information about the process,” says Snyder. “[It shows] how they got to the point where they crossed the line and got into trouble, and how it affected them personally and professionally.”

As he got to know these criminals, Snyder came away with insights and questions about their crimes and what motivated them to cross the line. Inspired, he began the Prison Life podcast, often speaking to the criminals in the time after their sentencing but before going to prison. Snyder recently wrote an article for the March/April issue of Fraud Magazine about what motivates insider traders.

“Someone who’s got a gripe with the company might be a risk and should be looked at,” says Snyder. He used the case of Scott London as an example. London — at the time, a senior partner at a Big 4 accounting firm — was convicted of insider trading after sharing secrets to help a buddy in a tight financial spot. Snyder said that London felt for his friend’s predicament, but also was disillusioned with his company at the time of his crime.

Other highlights from the interview include:

  • An analysis of the Scott London and Bryan Shaw insider trading scheme, including their motivations.
  • How insider trading can be compared to espionage.
  • Why Snyder thinks people cross the line into insider trading.

Helpful Resources Mentioned in This Episode

All the Advantages of Life Didn’t Stop Roomy Khan From Crossing the Line


Dick Carozza, CFE
Editor, Fraud Magazine

One question from prosperous hedge-fund trader Raj Rajaratnam changed Roomy Khan’s life: “How’s business?”

In 1997, Khan — who held graduate degrees in engineering and physics — was working in marketing at Intel in Silicon Valley. However, she told attendees at the closing session* of the 27th Annual ACFE Global Fraud Conference last week, she really wanted to become a high-tech stocks analyst on Wall Street, and she saw Rajaratnam — her mentor — as her ticket.  

So she called Rajaratnam who said that he was establishing Galleon Group — a hedge-fund firm in New York — and he was looking for information. Khan said she didn’t have access to any Intel financial data. “But I had marketing data on the top customers for Intel. I used this small piece of information combined with the guidance the company had given him in a previous conference call, and I made a mock Intel income statement for the upcoming statement,” she said. 

“I started sharing this information with Raj,” she said “It seemed wrong but harmless [because] this data on the top customer list changed on a daily basis,” Khan said. “Raj wanted this information and I wanted Wall Street.” However, Intel soon discovered that she was passing information to Rajaratnam and prosecuted. She had to pay a large fine, and was placed on house arrest for a time. Rajaratnam wasn’t touched.

Despite her brush with the law, Khan eventually landed a job at Galleon in Silicon Valley where she was introduced to the serious world of insider trading. She said she was careful to hide her fraud, but years later — after she had begun her own hedge-fund firm — the FBI eventually detected one of her illegal tips and pressured her into becoming a secret informant. Her testimony eventually helped bring down Rajaratnam — who was sentenced to 11 years in prison in 2011— and several of his associates.

When Khan was a young woman her father wanted her “to break the mold of a typical Indian woman, which was to be a housewife,” she said. He paid for her tuition to attend Columbia University for her Master’s in Electrical and Electronics Engineering. “‘That’s your dowry, your down payment for your future,’” she said he told her.

But all the advantages of a rich family life didn’t prevent her from succumbing to an ingrown fraud culture in hedge-fund trading where Rajaratnam expected her to pursue “The Edge”— his euphemism for insider trading.

She said fellow traders rationalized their actions and complained about the unrealistic trading rules. “But disagreeing with the law doesn’t give us the right to break it,” Roomy said.

Khan once lived the big life — a $15 million home, luxury cars, diamonds, designer clothes, expensive artwork. “Excessive spending. The more I spent, the harder I worked,” she said. But most of that is gone now. She speaks to university students, business groups and at conferences to share the insidious nature of insider trading and to warn others that they too can slip into the fraud culture.

“As a girl who grew up in India and came to the U.S. — I went to some of the top schools, worked for some of the best corporations, caught all the breaks that I wanted. … But I am responsible [for my fraud] and no one else,” she said. “The culpability is completely mine. I should have known better. Looking forward, I hope I can now be part of the solution.”

*The ACFE does not pay convicted fraudsters to speak.

Find more coverage from the 27th Annual ACFE Global Fraud Conference at

Press Plays a Vital Role in Fighting Fraud


Investigative journalist, author of The Billionaire's Apprentice and keynote speaker at the 2016 ACFE European Fraud Conference, 20-22 March in Brussels

What role do you think the news media currently plays in combating fraud?
Bringing cases against fraudsters is simply one part of fighting fraud. The other, equally important component, is the role the press plays in making sure these cases get wide visibility. By raising the profile of white-collar fraud cases the media ensures that there is a broader, deterrent effect that extends deep into a community and often well beyond it. For instance, the widespread media coverage of the prosecution of Rajat Gupta, the three-time chairman of consulting firm, McKinsey, and a director at Goldman Sachs and Procter & Gamble, sent a powerful message to directors on corporate boards that trading in confidential information was not only punishable by law but could also lay low revered corporate icons like Gupta. He was sentenced to two years in prison and saw his reputation devastated by the case. Similarly, the media coverage of the arrest of hedge fund manager, Raj Rajaratnam--his photo as he was paraded out of his Manhattan apartment in handcuffs by FBI agents--was televised again and again. It sent shudders through the hedge fund community. Until his prosecution by Manhattan U.S. Attorney Preet Bharara, Rajaratnam was viewed as a giant in the hedge fund world and one of the most successful South Asians in America. Indeed, without the press's deep coverage of these cases, Bharara's vigorous efforts to root out fraud and insider trading may have gone largely unnoticed by the financial and corporate world, the very groups which were targeted by the prosecutions.   

What do you think most contributed to the sharing of information from Rajat Gupta to Raj Rajaratnam? 
A central tenet of Gupta's defense was that he had no reason to give information to Rajaratnam, the founder of Galleon Group, a New York hedge fund, because unlike his McKinsey colleague, Anil Kumar, he received no benefit from breaking the law. No money changed hands between Gupta and Rajaratnam. While that's certainly true, I believe there was a potential benefit that Gupta was looking to receive from his relationship with Rajaratnam. Remember at the time Gupta had stepped down from his perch at McKinsey and he was looking for a second act in life that would allow him to monetize the wealth of contacts he had amassed in his years as a corporate drone and attain the unimaginable riches that someone like Rajaratnam had. It was this possibility of great wealth--not friendship or loyalty--that prompted him to share corporate secrets with Rajaratnam. He knew that what Rajaratnam wanted was information. And if he was to play a pivotal role in Galleon International, a subject which was under discussion between the two men in the summer of 2008, it would be his skills as an information-gatherer, not as a management consultant, that Rajaratnam would value the most. I believe he began feeding Rajaratnam corporate secrets so that Rajaratnam would value him more and look more generously upon his bid to have a bigger role and a larger financial interest in Galleon International.

What do you most hope attendees will take away from your presentation titled, “Trapping the Wolves of Wall Street: How the Feds Cracked America's Biggest Insider Trading Case?”
I hope attendees will come away with a realization of the importance of routine regulatory checks and basic investigative work in cracking open big and sophisticated white-collar crime cases. When the Galleon case exploded into public view, everyone focused on the wiretap recordings that criminal authorities obtained, which provided a chilling minute-by-minute reconstruction of trading on inside information by Rajaratnam and his web of accomplices. But remember the wiretaps would have never happened had it not been for years of digging and shoe-leather investigating by a couple of dogged attorneys at the Securities and Exchange Commission. 

You recently wrote a book about the people behind the headlines. What does your book focus on, and why is this story so important to tell?
The Billionaire's Apprentice: The Rise of the Indian-American Elite and the Fall of the Galleon Hedge Fund sheds light on what motivates good people do bad things. In it, I focus on Gupta, who for most of his career led an exemplary life contributing not just to the corporate sphere but also to the charitable world. He was so respected that he was the only Indian-American invited by presidents of both political parties to dinners at the White House. What prompted a man like him in the seventh decade of his life to put aside his moral compass and cross the line? It is a deeper appreciation of the forces that pushed Gupta to transgress that is important to understanding the mindset of white-collar criminals. 

Read more about Raghavan and the other keynote speakers at this year’s ACFE European Fraud Conference. And don't forget, the last day to register early and save EUR 125 is this Friday, 19 February.

If the Supreme Court Won't Help Stop Insider Trading, Who Will?


Bruce Dorris, J.D., CFE, CPA, CVA
Vice President and Program Director at the ACFE

The Supreme Court's decision not to review a recent insider trading case produces a cloudy precedent for white-collar prosecutions.

The U.S. Supreme Court recently decided that they would not hear the Justice Department's challenge of a major appeals court decision, United States v. Newman, which overturned two counts of insider trading in 2014. The case against former hedge fund managers Todd Newman, of Diamondback Capital Management, and Anthony Chiasson, of Level Global Investors, was initially brought by the U.S Attorney's Office for the Southern District of New York. The government alleged that Newman and Chiasson used a round-robin ring of insider trading tips to earn a combined total of $72 million for their funds.

After a six-week trial on securities-related charges in 2012, a federal district court jury found the defendants guilty on all counts. Newman was sentenced to 54 months in prison, and Chiasson received a sentence of 78 months. In 2014, a three-judge panel of the U.S. Court of Appeals for the Second Circuit overturned the convictions. The Justice Department filed a petition to the Supreme Court to review the case in July 2015.

A conviction for insider trading requires proof that the person who disclosed the information, the tipper, received a "personal benefit." Under some circumstances, a "personal benefit" may be proven if there is a "meaningfully close personal relationship" between the tipper and the tippee. The Second Circuit reversed the convictions based on a very narrow interpretation of the term "personal benefit." The court also found that the Justice Department had not established that there was a "meaningfully close personal relationship" between either Newman or Chiasson (the tippees), and the providers of the insider trading tips (the tippers). The Second Circuit interpreted the 1983 case Dirks v. SEC to mean that for insider trading to have occurred, the providers of the tips must have benefitted from sharing the tips, which, the appellate court wrote, could not be proven.

The jury heard a lot of evidence in six weeks, enough to convict on all counts for each defendant. The Dirks decision gave the fact-finder fair latitude regarding the "objective facts and circumstances" to determine culpability in the case. But the Second Circuit's interpretation will create problems for prosecutors in future cases, as the margin for that connection just shrank. It seems illogical to think that both the tippers and tippees did not see the potential for misuse of the confidential information repeatedly provided over the span in this case. These are not your average investors. These are really smart, sophisticated traders, who understand the nuances in securities law and now appear to have a more vague definition to use as a defense.

Read the full article at