Ex-Citigroup Broker Is Fined $500 in Squawk-Box Case
Former Citigroup Inc. stockbroker Ralph Casbarro, who cooperated with prosecutors, was fined $500 and received no prison sentence or probation for his involvement in a scheme to let day traders eavesdrop on internal conversations over brokers’ “squawk boxes.”
Casbarro, 48, was fined today by U.S. District Judge I. Leo Glasser in Brooklyn, New York. Casbarro pleaded guilty in 2005 to one count of conspiracy to commit securities fraud. He was fired by Citigroup before being indicted.
“I know what I did was wrong without a shadow of a doubt and I’m sorry for it,” Casbarro told the judge.
Kenneth Mahaffy Jr., a former broker at Merrill Lynch & Co. and Citigroup, and five co-defendants were found guilty in the case in April 2009. Mahaffy was sentenced to two years in prison in December. In July, the men lost a bid to have their convictions tossed, after claiming prosecutors hid evidence of their innocence.
Glasser criticized the government for putting off Casbarro’s sentencing for so long.
“This has been five years since Mr. Casbarro pleaded guilty,” the judge said. “Is that really part of the sentence that has already been imposed?”
Assistant U.S. Attorney Jonathan Green said Casbarro agreed to the delays as part of his cooperation accord with prosecutors. Casbarro gave important assistance to the government, prosecutors said, though they didn’t call him to testify against his co-defendants.
A cooperator’s sentencing is delayed until after a trial because testifying is taken into account when the punishment is bestowed, Green said.
Two of Mahaffy’s co-defendants who went to trial are former brokers. The three others are former day-trading executives at New York-based A.B. Watley Group Inc.
Casbarro accepted bribes from day traders in return for allowing them to hear Citigroup customer orders. Squawk boxes are internal intercoms used by brokers to discuss pending trades by their banks. The day traders were accused of using information overheard on the intercoms to trade shares ahead of larger institutional transactions.
Casbarro would call day traders at A.B. Watley and leave his phone off the hook next to the squawk box, according to prosecutors.
After pleading guilty, Casbarro was barred from the associating with any broker or dealer by the U.S. Securities and Exchange Commission.
“He early on recognized that he had broken the law and pleaded guilty five years ago,” Casbarro’s lawyer, Lawrence Iason of Morvillo, Abramowitz, Grand, Iason, Anello & Bohrer PC, said at the hearing today. “He has extensively cooperated with the government.”
Iason declined to comment after the hearing.
The government agreed to dismiss its case against another co-defendant, former A.B. Watley Chief Operating Officer Michael Picone, in return for his cooperation with prosecutors, U.S. District Judge Jack B. Weinstein said at a January 2009 hearing. Picone didn’t admit to any wrongdoing.
The case is U.S. v. Mahaffy, 05-cr-00613, U.S. District Court, Eastern District of New York (Brooklyn).