insider trading

Today’s Ethics Quiz: How Do You React To Congressional Insider Trading?

/ Jack Marshall / 13 Comments

 

Gekko for Congress. He has what It takes...Insider trading experience!

An  study in the journal Business and Politics last week reported that the investments of members of the House of Representatives outperformed those of the average investor by 55 basis points per month, or 6 percent annually. It concluded that lawmakers are taking advantage of inside information to make significant profits, engaging in conduct that would send a Gordon Gekko or Martha Stewart to jail.

“We find strong evidence that members of the House have some type of non-public information which they use for personal gain,” the four researchers who authored  “Abnormal Returns From the Common Stock Investments of Members of the U.S. House of Representatives” wrote. Continue reading →

Now We Know: 22.5% of Business Execs Don’t Know What Ethics Is

/ Jack Marshall / 3 Comments

The Potter Factor: is 20% too much?

David Sokol was widely believed to be the anointed successor to billionaire Warren Buffett at the helm of Berkshire Hathaway Inc. until he resigned unexpectedly, following shocking revelations about his personal stock trading. Clever Sokol! He purchased ten million dollars worth of shares in Lubrizol Corp., a chemical company, then persuaded his boss, Buffett, to acquire it. Buffett agreed, the purchase swelled the values of the stock, and Sokol then sold his shares at a hefty profit, about 3 million dollars.

Sokol lost his job over the transaction, which has tarnished Buffett’s reputation, but he got his money. He appears to have found a neat little loophole in the insider trading prohibitions, which make it illegal for an individual to profit from investments made with the assistance of information that is not generally known. If Sokol knew that Buffett was going to purchase Lurizol and bought the stock to profit from it, he could be headed to jail. Because he made the purchase before he and Buffett discussed the deal, however, he’s only heading to the bank. Galling as it is, most authorities agree that he broke no laws.  Continue reading →

Ethics Quote of the Week

/ Jack Marshall / 1 Comment

“If you find yourself chewing the memory card in your cellphone to destroy any record of your misconduct, something has gone terribly wrong with your character.”–Robert S. Khuzami, S.E.C. enforcement director.

[ Wall Street trader Zvi Goffer was arrested today and accused of being the mastermind of the latest insider-trading scandal, a tipping-and-trading ring that involved confidential sources from many places that should know better, like the prominent law firm of Ropes and Gray.  Arthur J. Cutillo, a lawyer at the firm, was accused of sharing secret information with  Goffer on  deals the law firm was handling for clients. Prosecutors say, according to the New York Times story, Goffer insisted his confederates communicate through disposable cellphones, just like drug dealers.
When the illegal trading was complete,  Goffer destroyed his phone records by biting the phone’s SIM card in half with his teeth.]