Former Dell Execs Involved In Massive Insider Trading Probe

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."

Did pay off the right people?

[Manip]

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.

Re:Libertarianism and insider trading

[Scareduck]

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.

Re:Insider.. it's all insider..

[nanoflower]

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.

Re:Meh

[pwizard2]

I've grown absolutely disgusted with big business AND the government. These executives are already rich from their salaries/company perks, so why even do something like this in the first place? They don't need the money... what can they buy with it that they already can't afford? I don't understand...is it just a penis-measuring game where executives are looking to make more money than the rest? Libertarianism once appealed to me, but I've seen more and more that people can't be trusted to do the right thing. The existence of a true free market depends on the major players not being a bunch of sociopaths. Giving more power to the government isn't the answer either because their agenda doesn't usually match up with mine. It's a problem with no solution.

Meanwhile, lots of ordinary people can barely afford to get by these days. If I were in charge of a company and earning several million a year, I would sacrifice my personal income for the year and give it to the people working for me instead. They need it more. If you need millions rolling in each year to maintain your lifestyle, you're doing something wrong.

Re:How dare they make information public too soon!

[stewbee]

Step away from the libertarian kool-aid for a minute and think about it rationally. Here is an excerpt from wikipedia about information asymmetry which is what occurs when there is insider trading.

In economics and contract theory, information asymmetry deals with the study of decisions in transactions where one party has more or better information than the other. This creates an imbalance of power in transactions which can sometimes cause the transactions to go awry, a kind of market failure in the worst case. Examples of this problem are adverse selection,[1] moral hazard, and information monopoly.[2] Most commonly, information asymmetries are studied in the context of principalâ"agent problems.

This affects things such as rational pricing of goods, as well as supply and demand. Insider trading is also a momentary arbitrage. While there is nothing inherently wrong with arbitrage, those privy to the information are those that get to take advantage of it while the non-informed parties will suffer. This is not conducive to a true free market.