White Collar Criminal Defense Group

Broker Pleads Guilty To Insider Trading With Information Stolen From Law Firm

A securities broker pleaded guilty on Wednesday in the U.S. District Court in Trenton to a securities fraud conspiracy that profited from his use of material inside information stolen from the New York office of a global law firm.  Contemporaneous with the plea, the government filed the criminal information detailing the charges, which also included one count each of securities fraud and tender offer fraud. 

The case arises out of the defendant Vladimir Eydelman’s having trading on material non-public information from 2009-2013, while a broker at Oppenheimer & Co. and later at Morgan Stanley.   The inside information was provided to him by his brokerage client, Frank Tamayo.  According to the government, Tomayo obtained the inside information from a friend and former law school classmate, Steven Metro, who was the managing clerk of the New York office of Simpson Thacher and Bartlett, LLP.  The inside information disclosed by Metro related to corporate transactions, including mergers and acquisitions or tender offers, in which the law firm represented a party or financial advisor to the transaction. 

The government charged that Metro collected the inside information by scouring the law firm’s computer systems using search terms relating to corporate transactions, as well as client names and client-matter numbers.  Metro would then pass on the information to Tamayo in meetings at restaurants and coffee shops in Manhattan, providing, among other things, the names and/or ticker symbols of the companies whose securities should be purchased, the general timing of the planned deals, and information related to how the deals would affect the issuer’s stock price once announced.  After Tamayo received the inside information from Metro, Tamayo would meet with Eydelman and pass the information to him.  According to the government, Tamayo would show Eydelman the paper or napkin on which Tamayo had written the ticker symbol of the company whose securities should be purchased.  After Eydelman memorized the ticker symbol, Tamayo, in an apparent attempt at a bit of spy tradecraft, would then place the paper or napkin into his mouth and chew it until it was destroyed.

The government charged that, after receiving the inside information provided by Metro, Eydelman would purchase securities for himself, family members, friends and clients, including Tamayo.  He would then quickly sell the shares and cover any positions once the relevant deal in each instance was publically announced and the stock price rose.  The government estimates that by exploiting the information that Metro had stolen from the law firm, Eydelman and conspirators Metro and Tamayo netted more than $5.6 million in illicit profits.

Tamayo pleaded guilty to conspiracy and securities and tender offer fraud in September of 2014.  Metro has maintained his plea of not guilty and is scheduled to go to trial on February 8, 2016.

Cyber hacking incidents have grabbed headlines recently, causing companies, healthcare institutions and professional service firms to reinforce their security from outside threats.  This case, however, is a reminder that some of the most substantial threats to the security of a company’s sensitive information can come from within.

Houston Psychiatrist Convicted In $158 Million Medicare Fraud Scheme

On Thursday, a Houston psychiatrist was convicted of participating in a $158 million Medicare fraud scheme, following a seven day federal jury trial.  The charges against Sharon Iglehart, M.D., included conspiracy to commit health care fraud, one individual count of health care fraud and three counts of making false statements related to health care matters.

As reported by DOJ in a news release on Friday, the evidence presented at trial demonstrated that from 2006 until June 2012, Iglehart and others engaged in a scheme to defraud Medicare by submitting, through Riverside General Hospital (“Riverside”), approximately $158 million in false and fraudulent claims for Partial Hospitalization Program (“PHP”) services to Medicare.  A PHP is a form of intensive out-patient treatment for severe mental illness.

The evidence at trial demonstrated that the beneficiaries for whom Riverside billed Medicare did not receive PHP services, and rarely saw a psychiatrist.  Even when those beneficiaries did see a psychiatrist, they did not receive intensive psychiatric treatment.  The government also presented evidence that Iglehart personally billed Medicare for individual psychotherapy and other treatment to patients that she never actually provided.  This was exacerbated further by evidence that Iglehart falsified medical records of patients to make it appear as if she provided psychiatric treatment when, in fact, she did not.

Dr. Iglehart is the 13^th individual to have been convicted of offenses based on their roles in the Riverside PHP scheme charged by the government.  This includes former Riverside President, Earnest Gibson, III, who was sentenced in June to 45 years in prison.  The details of his trial were outlined in a post on White-Collared on July 7, 2015.  Both Gibson and his son, Earnest Gibson, IV, have appealed their sentences.  Following his trial, Earnest Gibson, III, claimed that the government’s case was motivated by racism and a desire by others to obtain his hospital’s valuable real estate holdings in Houston’s Third Ward.  It is not known yet whether Dr. Iglehart will also file an appeal.