Matthew Teeple, a former analyst at a San Francisco-based hedge fund who was accused of taking part in a $27 million insider-trading scheme, admitted that he passed on a tip about Foundry Networks Inc.’s acquisition of Brocade Communications Systems Inc. on which others traded.
“I deeply regret the role I played in this illegal conduct,” Teeple told U.S. Magistrate Judge James Francis in New York today.
Teeple was scheduled to go to trial in July along with David Riley, the former chief information officer at Foundry who’s accused of providing him with the illicit tips. Both were charged with one count of conspiracy and three counts of securities fraud. By pleading guilty to the one count of conspiracy, Teeple faces a maximum prison term of five years, rather than the 20 years he would have faced on the fraud charge.
Riley and Teeple were among 86 people charged since 2009 as part of a crackdown by the office of U.S. Attorney Preet Bharara and the Federal Bureau of Investigation in New York on insider trading at hedge funds. The initiative resulted in 81 convictions, most through guilty pleas. No one charged with insider trading has been acquitted at trial.
Eric Bruce, Teeple’s lawyer, declined to comment after today’s hearing. Riley’s lawyer, John Kaley, didn’t immediately return a call seeking comment about Teeple’s guilty plea. Riley pleaded not guilty last year.
The U.S. Securities and Exchange Commission also sued Riley and Teeple, as well as John V. Johnson, who the U.S. said was a portfolio manager for a Denver-based firm. Johnson pleaded guilty to insider trading last year.
Riley tipped Teeple about Foundry being acquired by Brocade in 2008, five days before the deal was announced, according to prosecutors. Within two hours of his conversation with Riley, Teeple called another analyst at an unidentified investment adviser, who traded on the information, according to the U.S. The investment adviser earned more than $16 million and avoided losses of more than $11 million, prosecutors said.
U.S. District Judge Robert Patterson in New York is scheduled to sentence Teeple in September.
The criminal case is U.S. v. Riley, 13-cr-339, U.S. District Court, Southern District of New York (Manhattan). The SEC case is Securities and Exchange Commission v. Teeple, 13-cv-02010, U.S. District Court, Southern District of New York (Manhattan).
(An earlier version of this story corrected Teeple’s employment.)