U.S. judge declines broker guilty plea in IBM insider trading case

A former stockbroker pleaded guilty on Thursday to his role in an insider trading scheme centered on a technology company acquired by International Business Machines Corp in 2009.

Daryl Payton, a former trader at Connecticut-based Euro Pacific Capital Inc, pleaded guilty to one count of conspiracy to commit securities fraud in New York federal court, one month before he was scheduled to face trial alongside another former Euro Pacific broker, Benjamin Durant.

But in an unusual move, U.S. District Judge Andrew Carter declined to accept his plea, saying he was not convinced Payton had properly articulated how he knew the inside information in question was obtained as a result of a breach of confidentiality.

Carter gave U.S. prosecutors and Payton's attorneys until next week to submit court papers explaining why he should accept the plea as sufficient.

Payton and Durant were charged in June for their alleged involvement in an information-sharing conspiracy focused on IBM's purchase of software maker SPSS Inc in 2009.

Three people have already admitted to sharing and trading on secret information about the acquisition that originally came from a corporate lawyer.

The lawyer, who has not been charged, has been identified in a related U.S. Securities and Exchange Commission civil lawsuit as Michael Dallas, a former associate at the law firm Cravath, Swaine & Moore.

Authorities said Dallas shared information about the pending deal with a friend, Trent Martin, an analyst at Royal Bank of Scotland Group Plc.

Martin then told his roommate, Thomas Conradt, a broker at Euro Pacific, authorities said. Conradt in turn shared the tip with others at his firm, including Payton and Durant, who prosecutors said purchased options and shares in SPSS based on the insider information.

Martin, Conradt and David Weishaus, another Euro Pacific trader, all pleaded guilty last year and agreed to cooperate with prosecutors.

At a hearing on Thursday, Payton admitted to trading based on the tip and said he knew the information must have been obtained in violation of a confidentiality duty because it was so specific, since it included the purchase share price and the date.

"I understood that this was inside information that should have been kept confidential," Payton said.

But Carter seemed skeptical that Payton's explanation was sufficient to prove he knew a duty had been breached, asking him to elaborate before deciding not to accept the plea.

If Carter accepts the plea, Payton would face a maximum of five years in prison.

Durant is still scheduled for trial in December. Carter denied his motion to dismiss the charges on Thursday.

The indictment also refers to another co-conspirator at Euro Pacific who has not been identified.

Tags
International Business Machines Corp, Euro Pacific Capital, SPSS, Royal Bank of Scotland Group
Join the Discussion
Related Articles
More Business News
IRS Announces $1 Billion Unclaimed 2020 Tax Refunds, Urges Taxpayers to Submit Tax Returns As Deadline Looms

IRS Announces $1 Billion Unclaimed 2020 Tax Refunds, Urges Taxpayers to Submit Tax Returns As Deadline Looms

Ohio Woman Sentenced for Massive Social Security Scam Involving Dead Child's Identity

Ohio Woman Sentenced for Massive Social Security Scam Involving Dead Child's Identity

NY Attorney General Letitia James Plans to Collect $454M by Freezing Trump's Bank Accounts, Properties

NY Attorney General Letitia James Plans to Collect $454M by Freezing Trump's Bank Accounts, Properties

Apple Faces US Antitrust Lawsuit Over Smartphone Monopolization, High Consumer Prices

Apple Faces US Antitrust Lawsuit Over Smartphone Monopolization, High Consumer Prices

Real Time Analytics