The Securities and Exchange Commission has charged a Walt Disney employee and her boyfriend in a scheme to sell confidential information about Disneys quarterly earnings to hedge funds.
The SEC alleges Bonnie Jean Hoxie an administrative assistant to a high-level Disney executive who ran the company's corporate communications department and her boyfriend Yonni Sebbag sent anonymous letters in March 2010 to more than 20 hedge funds in the U.S. and Europe, offering to provide pre-release results of Disney's second quarter 2010 earnings in exchange for a fee. Some hedge funds alerted the SEC, which immediately worked with the U.S. Attorney's Office for the Southern District of New York and the Federal Bureau of Investigation to investigate.
The FBI set up an undercover operation and made several contacts with Sebbag, who offered to sell the information, in one instance for $15,000 and in another for half the expected trading profits.
In early May, Hoxie obtained confidential information concerning Disney's quarterly earnings and provided it to Sebbag, who in turn sold it to an FBI agent posing as an investment manager.
"Hoxie and Sebbag stole Disney's confidential pre-release earnings information and put it up for sale," said Robert Khuzami, director of the SEC's Division of Enforcement, in a statement. "Fortunately, multiple hedge funds reported the illicit scheme, and the SEC and criminal law enforcement authorities acted quickly to stop this brazen attempt to establish an ongoing insider trading business."
According to the SEC's complaint, filed in U.S. District Court for the Southern District of New York, Hoxie had regular access to confidential information concerning Disney's financial performance and operating plans.
The SEC alleges that Sebbag told FBI agents posing as investment managers that he wanted to establish a business relationship to share confidential information on a regular basis, and wanted to be compensated. Sebbag also expressed his understanding of the risks involved and his desire to avoid being caught.
Among excerpts of Sebbag's e-mails to undercover agents (includes original spelling and punctuation):
"First of all, i am not a fed, I have no way to prove it at this point but i am not asking you to disclose your identity not i will disclose mine. It is up to you to determine if this is worth the risk as i did. I work for Disney, that is all i can tell you."
"I can deliver 3 to 4 days before release. I will email you the report as soon as i have it and you will wire transfer the money to my account after you get ahold of it. I am asking you to make me an offer based on the capital gains from the trade and the risk i am taking delivering this information to you? Also, i am looking to build a strong business relationship with you for future quarters and information."
"I dont think we will get caught if we stay discrete and careful. You can count on my discretion as i am counting on yours "
" $15k sounds great and $30k even better as i hope you will make a killing from Q2 earnings. I promise i will keep you informed of any unanticipated event, i keep my ears wide open here."
The SEC alleges that two days before Disney's earnings announcement, Sebbag e-mailed the undercover agents a 107-page confidential document that contained a series of talking points for Disney executives during an upcoming quarterly earnings conference call. It contained very detailed information about the quarterly performance and future prospects of Disney's various business segments. The SEC further alleges that Hoxie learned that Disney's earnings per share for the quarter and provided that information to Sebbag, who in turn provided it to an undercover agent approximately two hours before its public release.
According to the SEC's complaint, Sebbag made arrangements to meet the undercover agents in person so he could collect his payment. At a May 14 meeting in New York, Sebbag told the agents he wanted "to make a lot of money" through the arrangement and asked for their advice on how to open up an off-shore account to deposit his proceeds from the scheme, stating that he didn't "want to go to jail." Sebbag left the meeting with an envelope containing $15,000 in cash, and he subsequently made arrangements to meet with them again in California to continue building the illicit relationship. The FBI arrested Sebbag and Hoxie on Wednesday.
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