A U.K. man who pleaded guilty to conspiring in an insider-trading scheme told a government informant that illegal tips he got could be traced by to an ex- New York Stock Exchange director, according to court papers.
Taiyyib Ali Munir pleaded guilty to conspiracy in federal court in Brooklyn, New York, on Oct. 15. Munir, who lives in London and worked in the financial industry, admitted that he agreed to obtain and sell confidential earnings reports of public companies from December 2011 to July 2012.
Munir, 30, told U.S. Magistrate Judge Robert Levy that he “spoke with a person located in New York who said he could obtain earnings reports for companies before public release of that information,” according to a transcript of his plea hearing. Munir didn’t identify the person at his plea. He is quoted in court papers as saying one of his sources of inside information got leaks from a former NYSE director.
The guilty plea came as part of a broader U.S. probe into an insider-trading scheme allegedly stretching from Central Asia to New York. Prosecutors say Munir funneled tips to the informant, who in 2010 and 2011 was managing accounts of a former Central Asian official and who isn’t identified in the complaint.
The former government official was identified by the Wall Street Journal as Maksim Bakiyev, son of Kurmanbek Bakiyev, the ex-president of Kyrgyzstan. The newspaper didn’t identify its sources in the Oct. 17 story. The elder Bakiyev was ousted in an April 2010 coup and has taken refuge in Belarus.
Maksim Bakiyev was arrested in London on Oct. 12, and the U.S. is trying to extradite him for conspiracy to commit securities fraud and obstructing justice, the U.S. Embassy in Kyrgyzstan said Oct. 13 in a statement. Susanna Wood, an embassy press officer, declined to provide more details about the charges referred to in the embassy’s statement.
Beyond Munir, none of the other insider trading suspects has been identified by the government. Prosecutors in Brooklyn have said in court that they expect to return an indictment in six to nine months. They haven’t identified their targets.
Munir, who is free on $1 million bail, was arrested in July and accused of passing inside tips about Global Industries Ltd., Tyco International Ltd. and InterMune Inc. Under a plea agreement, he faces a prison term of as long as six months when he’s sentenced on Jan. 24, according to the transcript. Prosecutors say he worked in the “financial industry” without providing more details.
In its April 2 criminal complaint against Munir, prosecutors in Brooklyn quoted from a conversation that the government informant helped record with Munir. Munir claimed to have two sources of information, referred to in the complaint as co-conspirators “CC-3” and “CC-4.” Neither was identified by name.
“Munir indicated that CC-3 and CC-4’s sources of inside information include an ex-director of the New York Stock Exchange,” an agent with the Federal Bureau of Investigation said in the complaint, summarizing Munir’s comments from a recorded conversation.
The agent then quoted Munir’s exact words to the informant about his sources: “They’re not only getting these earnings with the paperwork 48 hours in advance, but they’ve also got the ex-director of the New York Stock Exchange,” Munir told the informant on Jan. 12, according to the complaint.
The informant, also not named, is identified in court papers as “the chief executive officer of a financial advisory and consulting firm based in New York” who surrendered to U.S. authorities in December. The informant has worked with prosecutors for months, according to the complaint.
NYSE Euronext, which runs the New York Stock Exchange, has 16 directors, according to its Feb. 29 filing with the U.S. Securities and Exchange Commission. Richard Adamonis, a spokesman for NYSE Euronext, declined to comment on the allegations in the complaint.
Robert Nardoza, a spokesman for Brooklyn U.S. Attorney Loretta Lynch; Munir’s lawyer, Pamela Johnston; and a lawyer for Bakiyev, Michael O’Kane, also declined to comment on the case.
Rebekah Carmichael, a Justice Department spokeswoman in Washington, declined to comment on the charges described in the embassy statement.
“We can’t comment, unfortunately, as there are no publicly filed charges at this point,” Carmichael said yesterday in an e-mail.
In Kyrgyzstan, the younger Bakiyev, who served in his father’s administration as a head of a development agency, is now accused by government prosecutors of money laundering and looting state assets, according to Edil Baisalov, the deputy minister for social development who was involved in the 2010 coup. O’Kane declined to comment on the charges.
In the complaint against Munir, prosecutors quoted him and the informant discussing a demand from CC-3 and CC-4 for a $122,000 payment for “past successful trades.” According to the complaint, the former Central Asian official refused to pay the debt because an earlier tip was unprofitable and because U.S. regulators had frozen the proceeds of a profitable trade.
“They want payment,” Munir said in a Jan. 3 conversation with the informant, according to the complaint. “They’re expecting 122.”
In a related civil lawsuit, the SEC last year won a court order freezing $5.3 million stemming from what regulators said were “highly profitable and suspicious” trades in Global Industries, an oil-field construction company based in Carlyss, Louisiana. The same trades are under scrutiny in Munir’s criminal case, prosecutors told a judge at an Oct. 12 hearing in federal court in Manhattan.
In July, a Moscow-based investment company called Ergoport Experts Ltd. claimed the funds as its own and filed court papers seeking possession of the $5.3 million.
The trades involved an individual “who previously held a high-level position in the government of a Central Asian country, which government was overthrown by a coup d’etat in 2010,” federal prosecutors in Brooklyn said in court papers.
Robert Heim, a lawyer for Ergoport in New York, said last week that neither President Bakiyev nor his son is a shareholder in the company.
Managing $40 Million
Ergoport identified itself in court papers as a unit of an entity called Interhold Ltd. Ergoport, which according to Heim manages at least $40 million, said it made the trades in Global Industries, denied acting on inside tips, and sought to recover the $5.3 million.
On Aug. 15, federal prosecutors asked the judge to halt proceedings in the SEC suit so as not to interfere with the criminal probe in which Munir was charged.
“We are investigating a conspiracy in which it appears that individuals who exercised control over an account in Ergoport’s name agreed to use inside information in order to execute stock trades,” Assistant U.S. Attorney Rachel Nash told U.S. District Judge Ronnie Abrams at the Oct. 12 hearing in Manhattan.
Nash didn’t identify other subjects of the criminal probe.
Two phone calls placed to the press office of current Kyrgyzstan President Almazbek Atambayev today weren’t answered. There was no immediate response today to an e-mail sent to the office.
The criminal case is U.S. v. Munir, 12-cr-00648, U.S. District Court, Eastern District of New York (Brooklyn). The SEC case is Securities and Exchange Commission v. One or More Unknown Purchasers of Securities of Global Industries, 11-cv-06500, U.S. District Court, Southern District of New York (Manhattan).