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Former Dell Execs Involved In Massive Insider Trading Probe 149

Posted by Soulskill
from the dude-you're-gettin'-a-cell dept.
DMandPenfold writes "Two former Dell employees, including a former investor relations manager, were part of a $62 million record-breaking insider trading scam, involving the company's shares as well as Nvidia stock, according to the FBI. The news comes as the U.S. authorities step up their pursuit of inside traders. Two months ago, Galleon hedge fund founder Raj Rajaratnam was sentenced to 11 years in jail for his role in a scam involving AMD, IBM and 3Com stock. Yesterday, Sandeep Goyal, an employee at Dell's U.S. headquarters between 2006 and 2007 before becoming a financial analyst, was arrested. An unnamed co-conspirator in Dell's investor relations department from 2007 to 2009 is also alleged to have been part of the scam. ... Goyal allegedly made $175,000 by providing inside information about Dell to a hedge fund. He has pleaded guilty to charges of securities fraud."
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Former Dell Execs Involved In Massive Insider Trading Probe

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  • And yet... (Score:4, Insightful)

    by Cornwallis (1188489) on Friday January 20, 2012 @01:29PM (#38763686)

    and yet... John Corzine is still walking the streets.

    • Re: (Score:3, Insightful)

      by NikeHerc (694644)
      and yet... John Corzine is still walking the streets.

      So is Nancy Pelosi and a lot of other senators and congressmen. Does anyone think they should be immune from arrest due to insider trading?
      • Re: (Score:3, Insightful)

        by HerculesMO (693085)

        You fail to get the point.. read about MF Global and what Corzine did there.

      • Re:And yet... (Score:5, Informative)

        by scottbomb (1290580) on Friday January 20, 2012 @01:53PM (#38764126) Journal

        Oddly enough, insider trading is LEGAL for members of Congress. Ain't that just awesome?

        • Just curious, but what about former members of Congress? What if the crimes are committed while they're not in office?

          • Re:And yet... (Score:5, Insightful)

            by alexander_686 (957440) on Friday January 20, 2012 @02:30PM (#38764872)

            The short answer is no.

            The trick here is that a representative’s knowledge of pending legislation, regulatory actions, etc. (i.e. knowledge from his day job) is technically not insider information – which of course if big enough to drive a very large truck though.

            So congressmen can still be charged with insider trading if they got their knowledge outside of their day job Congressmen have been prosecuted when outsiders have bribed them with inside information (less paper trail then giving them money) but it’s been rare.

        • Re:And yet... (Score:5, Insightful)

          by hoggoth (414195) on Friday January 20, 2012 @02:19PM (#38764626) Journal

          Mod this up. Congress doesn't even try to hide their corruption these days.

          And this is how SOPA/PIPA will play out: A new version will be introduced just after the elections that includes exemptions/protection for the big players like Google and Facebook. This version will be passed no matter how much "the people" scream, as long as congressional donations aren't in jeopardy.

          • by Joe Snipe (224958)

            The "new version" has been in play since last year. [opencongress.org] Good luck trying to rally anyone to fight on the side of child pornographers.

      • No, they should all be locked up in Federal "Pound Me In The Ass" Prison, but as the people that make the laws are the people that benefit from that little loophole, I suppose that will never happen...

        Hell, even if by some miracle these assholes did get locked up, you know there would be pardons handed down somewhere. They take care of their own...

      • by Jawnn (445279)
        If anyone has anything like, you know, proof of such offenses, then no. If not, thanks for playing.
    • Corzine didn't trade on inside information. He simply traded using his customers funds.

      And just in case you thought that was illegal...well, it turns out using clients money to trade in "secure" assets like treasuries was always legal. Unfortunately, the financial industry successfully lobbied for the definition of "secure" to be broadened considerably in the last decade.

      Personally, after 4 years of this, I have no sympathy for anyone in the financial industry, broker or client. It's a den of iniquity and d

      • He traded in investment rated treasuries actually. It was just that these treasuries belonged to Spain, Italy etc. which at that point were rated investment grade, but really had serious risk of default. He stuck to the letter, but not the spirit of the law.
        • So to be clear, OP is complaining that someone who didnt actually break a US law isnt actually in prison. How terrible.

    • "piss boy! oh, piss boy!"

      - mel brooks

  • at this rate ... (Score:4, Insightful)

    by peter303 (12292) on Friday January 20, 2012 @01:30PM (#38763710)
    They might be able to start softball team of convicted inside traders at Fed Med by the end of the decade. its something everyone knows is happening, but almost no one gets caught.
  • by timeOday (582209) on Friday January 20, 2012 @01:32PM (#38763744)
    I would be curious to hear the libertarian viewpoint on whether insider trading should be a crime?
    • by Anonymous Coward on Friday January 20, 2012 @01:36PM (#38763818)

      I would be curious to hear the libertarian viewpoint on whether insider trading should be a crime?

      A truly free market would solve it!

      How?

      I SAID A TRULY FREE MARKET WOULD SOLVE IT!

      • Re:Free market! (Score:4, Informative)

        by Tsingi (870990) <graham.rick@[ ]il.com ['gma' in gap]> on Friday January 20, 2012 @01:45PM (#38764000)

        I would be curious to hear the libertarian viewpoint on whether insider trading should be a crime?

        A truly free market would solve it!

        How?

        I SAID A TRULY FREE MARKET WOULD SOLVE IT!

        Yes, you did say that. In fact, you can sell parts of your company to anyone you want, barring monopolistic actions. Until you make a public offering. That would be the stock market. Ownership is now public, so you are responsible to the public and private trading most certainly should be fraud.

      • by brian0918 (638904)

        How?

        Because IT is not a problem.

        • by istartedi (132515)

          For those who don't understand the free market concept, let me clue you in. It solves problems because it's an ideal. How do you obtain an ideal economic order, you say? Just send me $588,987 and I'll tell you. You must agreee not to share the plans with others. Those are my terms. I can set them, because it's a free market.

          • For those who don't understand the free market concept, let me clue you in. It solves problems because it's an ideal. How do you obtain an ideal economic order, you say? Just send me $588,987 and I'll tell you. You must agreee not to share the plans with others. Those are my terms. I can set them, because it's a free market.

            And I can refuse to buy, because it's a free market.

          • by brian0918 (638904)

            It solves problems because it's an ideal.

            What you don't understand is that an "ideal" is not something that one either must achieve perfectly or not bother doing. An ideal is something that must be continually strived to uphold, by all members. The extent to which people do not strive for that ideal, they will see the negative consequences of their actions. I could write a perfect free market constitution in 10 minutes, but if people do not actually try to uphold that constitution, the results will not be a free market. The purpose of discussions

            • by Qzukk (229616)

              The extent to which people do not strive for that ideal, they will see the negative consequences of their actions

              The extent to which people do not strive for that ideal, they get to enjoy the befits of others' work while keeping the benefits of their betrayal.

              Oh sure, it will catch up eventually, but by then they'll have taken their golden parachute and it will be someone else's problem.

              • by brian0918 (638904)
                Why do you believe that striving for such an ideal only works one way? It is just as necessary to add market checks-and-balances into the system, to be sure that fraud is not occurring. This is already done in contracts between individuals, and between organizations. So I don't understand what nightmare world you're claiming would exist in a free market.
                • by Qzukk (229616)

                  I'm not claiming that there's any nightmare world, I'm simply claiming that the free market is like a game where the first person to quit wins. Eventually someone will play the regulatory capture card they were keeping up their sleeve for the big bucks, the only question is how fast the card table will fall down when the fat cats playing around it all try to slam down their ace of spades first.

                  • by brian0918 (638904)

                    Eventually someone will play the regulatory capture card

                    A free market would not have regulatory agencies for which to capture.

                    • by Qzukk (229616)

                      Except for the ones created by the first people to scream "think of the children!" and throw their money at the problem.

                      Which is sort of how we lost lawn darts the first time around, I believe.

      • by Hillgiant (916436)

        I SAID A MAGICAL PRINCESS RIDING A PINK UNICORN WILL SOLVE IT!

        I, for one, grow weary of this mythical "truly free market". Rather I would like some practical solutions for the problem at hand.

      • by plopez (54068)

        There is some debate among Economists whether such a beast can ever truly exist. See Wikipedia for a brief intro.

    • by Scareduck (177470) on Friday January 20, 2012 @01:39PM (#38763868) Homepage Journal

      It doesn't strike me as being an easy thing, either way; on the one hand, it's a kind of fraud, which is one of the legitimate reasons for having a government (institutionalized and monopolized force). On the other, information is always diffused and imperfect in any market, so arresting and incarcerating people for not providing it is not likely to work well if only for political reasons (Google Harry Markopolos for an example of why). In that sense, the SEC gives people a false sense of security that the government is doing some aspect of due diligence for them that is not in reality happening.

      • Insider trading, to the extent that there is anything wrong with it, is a fairly straightforward violation of the trusted agent/principal relationship. The shareholders of a company (the principals) hire agents (the managers / high-level employees) to represent their interests; the agents then take advantage of information and influence they receive in the course of that relationship to benefit themselves, either by trading on that information, by selling it to third parties, or by diverting supplier contra

    • by Bodhammer (559311)
      Are you talking about private folks or when US Congressmen and Senators do it by steering legislation to benefit themselves and their lobbyists with knowledge the could never be known by the public and which may be against their sworn oaths to uphold the Constitution?

      I do solemnly swear (or affirm) that I will support and defend the Constitution of the United States against all enemies, foreign and domestic; that I will bear true faith and allegiance to the same; that I take this obligation freely, with
    • by Korin43 (881732)

      I think most (all?) libertarians support some sort of enforcement of contracts. So, one option is for stock exchanges to require all traders to sign some sort of contract stating that they won't engage in insider trading, and if they do, they're subject to some kind of sanction (fines/jail time).

      Only an idiot would trade at a stock exchange that didn't require this kind of contract. Sadly, there's enough idiots that it probably wouldn't work.

    • by chrb (1083577) on Friday January 20, 2012 @01:50PM (#38764086)
      My understanding is that the majority of libertarians would say: no, insider trading should not be a crime, as it does not involve the use of force. Government should exist to protect citizens from being deprived of life and property by force, and therefore the criminal statutes should reflect that. At worst insider trading would be a contractual violation, and hence subject to a civil court case. And if you have not signed a contract prohibiting insider trading, then an insider would have freedom to act as they wish. Some would go further and argue that insider trading is actually a good thing, as it lets outsiders gain some insight as to what is actually going on inside a company, ie. in itself, insider trading it is a form of information sharing that communicates useful information to people outwith the company.
      • by Fnkmaster (89084)

        If the equities market worked the way you propose, it would be essentially lawless and there would be no participation by the majority of the public. This would then be effectively equivalent to the situation in China currently. The vast majority there invest their savings in real assets because there is no presumption of honesty or equality in public markets.

        Whether you think this is good or bad, you have to realize this makes it much harder for companies to obtain equity financing from the free markets

        • I think you go too far when you go into China territory.

          I think it would be more fair to compare it to the Gilded Age of Robber Barons. Insiders who tilted the rules of the market in their own favor. Jay Gould and Daniel Drew would be good examples. These people gained control of corporations and tilted it towards their own gain vs. the shareholders. Took control of banks and choked off competition. Etc.

    • by Kenja (541830) on Friday January 20, 2012 @01:58PM (#38764206)
      A better question would be, if corporations are people, wouldn't buying stocks violate the 13th amendment abolishing slavery?
  • by Manip (656104) on Friday January 20, 2012 @01:38PM (#38763856)
    Insider trading is hugely common in the corporate world to the point that there is an entire industry surrounding it (Wall Street). Any prosecutions for "insider trading" are totally political. They either upset someone in power, upset a competitor with powerful friends, or didn't do something they were asked to do.

    See Quest's CEO as an example. He refused to allow the NSA to spy on Quest's customers and suddenly he is in jail for "insider trading." Opps.
  • by msobkow (48369) on Friday January 20, 2012 @01:40PM (#38763880) Homepage Journal

    It's nice to see some action on insider trading scams and valuation fraud, but how about nailing the big fish instead of tossing us minnows and thinking we'll be satisfied. I want to see the sharks hanging on a hook: the Wall Street traders and bankers who've cost the US and global economy literal BILLIONS.

  • by MaWeiTao (908546)

    if it's good enough for congress....

  • by iONiUM (530420) on Friday January 20, 2012 @01:42PM (#38763940) Homepage Journal

    Yesterday Google announced earnings. At 4:01pm EST, exactly. I was able to get the page at 4:01:05pm EST, and just as a joke at the exact same time I checked out after hours trading on GOOG. It was already down 8%, though 5 minutes earlier it was holding around even on close. Tell me, how anyone was able to parse that document in 4 seconds, place the trade, and have it go through after hours.

    The system is already so corrupt and broken that anybody who isn't on the "in" shouldn't ever try to invest except for extreme long term. I don't know why a case like this would surprise anyone.

    • by nanoflower (1077145) on Friday January 20, 2012 @01:52PM (#38764112)

      It's possible due to automated trading. If Google reported that their earnings were lower than expected even if only a small amount that could lead to some automated selling. That wouldn't require an analyst to read the report and decipher it before making a decision to sell/buy/hold.

      • by TheLink (130905)
        What if you wrote reports/articles in such a way that the automated stuff would screw up when parsing it? :)

        Of course you'd need to have some plausible deniability.
      • Still insider. Only someone with access to an ECN terminal could do this that quickly. Us regular people never have the opportunity.
        • Still insider. Only someone with access to an ECN terminal could do this that quickly. Us regular people never have the opportunity.

          That's not really the definition of insider trading. Insider trading would be someone at GOOG who sold (or sold short) stocks before the announcement after knowing material information that would reduce the price of the stock (poor earnings).

          If your definition of "insider" here refers to "professional trader": Yes, tautology lolcats will tell you that the professional trad

      • Exactly, I'm surprised the change was so little. I bet quite a few waves of buying and selling went on before the GP saw the price.

      • I have an uncle (in-law) who does exactly this. But does it for gov't stuff. Automated parsing of press release, trades based on those parsings. Tune for next release.

    • I've assumed for a long time that large shifts in stock valuations that don't appear to have a trigger are just insiders reacting to documents that will become public at a later date. By that time, all the information is already reflected in the price which stays relatively static on the "official" announcement. It's just the way the system works.

      • I've assumed for a long time that large shifts in stock valuations that don't appear to have a trigger are just insiders reacting to documents that will become public at a later date. By that time, all the information is already reflected in the price which stays relatively static on the "official" announcement. It's just the way the system works.

        If you really believe that the price impact of the official announcement has already been completed, you may as well bet on it. Anyone who is "late to the party

    • by tlhIngan (30335)

      Tell me, how anyone was able to parse that document in 4 seconds, place the trade, and have it go through after hours.

      You do realize that automated trading platforms do lexical analysis, right? They get a copy of all press releases and electronically decide if it's good or bad and do trades based on it. Even basic lexical analysis can tell you a statement of "loss" or "failed to meet expectations" is generally bad news (SELL!), while "higher than expected revenue" and "largest profit" is good news (BUY!).

      In

      • Yeah, If I were a Corperate executive important enough to merit a regular mention in press releases on earnings, I'd totally change my name to "Record Profits" .

    • Many automatic trading platforms support it.
      For example, you already know analyst/market estimates for revenues and profits. All of the markets know it, so it is priced in. If the actual numbers are higher, it is a surprise and the stock will go up. Else it will go down. So you just build in a news parser - Reuters/Bloomberg etc. can provide you the news in many formats. SEC also has reports in xml. So parsing it is trivial. After that it is just a matter of feeding it into your trading platform, which is
    • by onyxruby (118189)

      It's all automated. In the four seconds you mention a program parsed the document and noted certain key words. The computer than initiated a trade based on those key words. In all likelihood those trades were initiated well within .4 seconds of the release.

      Think of it this way when trying to understand just how prevalent automated trading and latency have become for trading. You know when you see pictures of a stock exchange and surrounding it you see skyscrapers? Those skyscrapers are largely filled with d

    • by deego (587575)

      >> Tell me, how anyone was able to parse that document in 4 seconds, place the trade, and have it go through after hours.

      As someone said, 4 secs could be ample time for a bot.

      Even if not:

      People who speculate try to figure out what the market is going to do without knowledge of the future, based on publicly available information.

      Unless you are claiming that you know for a fact that no trading system ever works, there is the possibility that whatever shorted google had simply figured out based on public

  • by theArtificial (613980) on Friday January 20, 2012 @01:46PM (#38764026)
    Dude, you're getting a cell?
  • That's been going on since Dell went public.
  • Not in the least here. The markets are obviously being manipulated.
  • To see insider trading going on at a respectable company like Dell of all places. I mean, look at the quality of their products and their stellar technical support (cough, cough).

    Excuse me, I must mop up that sarcasm that's been dripping on the floor.

  • You can have an un-regulated market which does not exhibit Free Market behavior, e.g. monopolies. And you can have a regulated market which comes *much* closer to a Free Market.

    Example. The NYSE has at least 3 layers or regulation. The rules of the NYSE is the first layer, and require such things as publicly signalling buy and sell prices which allows efficient , fair, and fast pricing. The the State of NY and and the SEC regulate the market to prevent fraud.

    Libertarianism will destroy Free Markets, IMO.

  • by roman_mir (125474) on Friday January 20, 2012 @04:18PM (#38766730) Homepage Journal

    Real insider trading is done in government, before it releases a law or decision upon a company's future (like knowing whether FDA will deny or allow a new drug to the market), and Senators / Congressmen being bribed in stock options where straight up cash would be considered an illegal bribe, because they voted themselves this little neat trick.

    Insider trading idea is a bunch of crap. The only problem is FRAUD, all other trading that is done privately is done based on some form of information.

    For a top manager to bet against his company and then tank the stock by doing something that would undermine the company's value is FRAUD.

    For a top manager to bet against his company because he THINKS that the company is going in the wrong direction - that's not fraud, that's common sense.

    For a government official to accept a bribe in form of a stock option or to short stock of a company before passing a LAW that would hurt that company financially - that is REAL insider trading fraud.

    • Most companies don't allow shorting or hedging company stock, at least to higher level employees. Some don't allow it for anyone. This creates conflict of interest.

      • by roman_mir (125474)

        Well, if that's in the charter, then it's their right to forbid that.

        However holding long is also 'insider trading', isn't it?

        Holding 'long' is based on insider information of how the company is doing. But it's not perfect knowledge. Nobody actually can predict future, thus nobody knows that a company will be OK in a year from now for real.

        Back in 2003 Kodak still had 64000 employees.

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