A Los Angeles federal judge granted $50,000 bail to an assistant to Walt Disney Co.’s head of corporate communications accused of leaking confidential stock tips about the entertainment company’s earnings.
Bonnie Hoxie, the assistant to Zenia Mucha, was ordered to appear June 3 for a court hearing in New York, while her boyfriend, Yonni Sebbag, was detained without bail. Federal prosecutors in New York charged the pair yesterday with sending letters in March to at least 33 investment companies including hedge funds with offers to sell confidential information about Burbank, California-based Disney.
Magistrate Judge Patrick J. Walsh in Los Angeles rejected a $10,000 bond for Hoxie before setting bail at $50,000, saying “there’s potential for her to be a flight risk.” Walsh said Sebbag “might be inclined to leave the country based on these charges.”
Hoxie, 33, and Sebbag, 29, were arrested yesterday in Los Angeles. The U.S. Securities and Exchange Commission yesterday also sued them.
“Hoxie and Sebbag stole Disney’s confidential pre-release earnings information and put it up for sale,” Robert Khuzami, the SEC’s enforcement director, said in a statement. “Fortunately, multiple hedge funds reported the illicit scheme, and the SEC and criminal law enforcement authorities acted quickly to stop this brazen attempt to establish an ongoing insider-trading business.”
None of the funds acted on the tips, according to a person familiar with the matter.
Disney, the world’s biggest media company, said May 11 that fiscal second-quarter profit climbed 55 percent on more successful film releases, including “Alice in Wonderland.” The shares fell that day after operating profit at the television unit that includes ESPN and ABC missed analysts’ estimates.
“The Walt Disney Company has been fully cooperating with this investigation,” the company said in a two-sentence statement.
On March 11, an undercover agent with the Federal Bureau of Investigation began reaching out to the pair, according to a criminal complaint filed yesterday in New York. On May 8, the two gave undercover FBI agents an internal Disney “talking points” document that the company planned to use during its earnings presentation, according to the complaint.
Three days later, they passed along Disney’s earnings per share, prosecutors said in the complaint. On May 14, Sebbag got a $15,000 cash payment from two undercover agents at a meeting on Long Island, New York, prosecutors said.
Court documents detail communications between Sebbag and the undercover agents.
“The most important thing in all that is to not get caught,” Sebbag wrote, according to the SEC complaint.
The criminal complaint includes a March 15 e-mail that Sebbag allegedly sent to an undercover agent pretending to be a hedge fund trader. In the e-mail, Sebbag wrote that Disney Chief Executive Officer Robert Iger “is in serious and advanced negotiations” to sell the ABC network to two private equity firms, “but no price has been determined yet.”
Sebbag offered to pass along new information as he learned it, according to the complaint. Disney said in its statement that “the reference in the complaint to conversations regarding the ABC Network were and are false.”
ABC, third among major U.S. TV networks in prime-time viewers, is the only broadcaster whose audience shrank this season through May 24, according to Nielsen Co. ratings data.
Iger told shareholders in March in San Antonio that, while he was comfortable with the company’s current assets, including ABC, he is always mindful of how to keep Disney growing.
“There are no guarantees in terms of what will remain part of our company and what will not,” Iger said.
The complaint doesn’t mention Mucha or suggest that the head of the company’s corporate communications unit engaged in any wrongdoing.
Before joining Disney in 2002, Mucha was press secretary to New York Governor George Pataki. From 1986 to 1992, she managed two successful campaigns for U.S. Senator Alfonse D’Amato, a New York Republican. Mucha didn’t immediately return calls and e-mail messages seeking comment.
Hoxie was to be released yesterday as soon as she was processed. The judge ordered her to surrender her passport and not to travel other than for her court appearances.
Hoxie and Sebbag were represented by public defenders who weren’t available for comment after the hearing.
Disney rose 75 cents, or 2.3 percent, to $33.07 in New York Stock Exchange composite trading yesterday.
The case is U.S. v. Hoxie, 10-mag-01113, U.S. District Court, Southern District of New York (Manhattan).