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Guilty Pleas Entered in Big Insider Trading Case

AP
Thursday, 10 May 2007 | 12:49 PM ET

A married couple, both lawyers, pleaded guilty to conspiracy and securities fraud Thursday in what was described as one of the biggest insider-trading operations since the 1980s, a $15 million scam that reached into some of the nation's top financial firms.

Randi Collotta, 30, a former employee of Morgan Stanley in Manhattan, and her husband, Christopher Collotta, 34, who worked in private practice, were among 13 people criminally charged in the case. They were free on $250,000 bail each.

The government said the trading network relied on insiders at Morgan Stanley and UBS Securities to steal valuable secrets from the companies. It also alleged a Bank of America Securities broker accepted kickbacks and that two former representatives of Bear Stearns obtained inside information on UBS.

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The Securities and Exchange Commission has described the case as one of the most pervasive Wall Street insider trading rings since Ivan Boesky and Dennis Levine engaged in notorious insider-trading schemes during the 1980s.

According to prosecutors, Randi Collotta was an associate in Morgan Stanley's global compliance division when she passed inside stock tips to her husband, who gave it to others, resulting in illegal profits of hundreds of thousands of dollars between September 2004 and August 2005.

Other people made money from the tips and gave Christopher Collotta a cut of the ensuing profits, according to an indictment.

The Collottas and three others were charged with conspiracy to commit securities fraud and securities fraud, which carry potential penalties of up to 25 years in prison.

When they announced the case in March, prosecutors and SEC officials said the defendants included registered representatives, compliance personnel and hedge fund portfolio managers who traded hundreds of tips over five years. U.S. Attorney Michael Garcia said Wall Street professionals repeatedly traded on secrets revealed to them by insiders at UBS and Morgan Stanley.

Stock upgrades and downgrades by UBS and impending corporate acquisitions involving Morgan Stanley clients were relayed before the news hit the market, authorities said.

The SEC said ringleaders working the UBS side of the scheme went to great lengths to hide their actions through clandestine meetings, disposable cell phones, secret codes and cash kickbacks.

At least three people have already pleaded guilty to charges in the case and await sentencing.

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