Ex-BlackRock Manager Jailed for 1 Year Over Insider-Tradingby
Mark Lyttleton was sentenced to 12 months by a London judge
45-year-old made 35,000 pounds trading in two energy firms
Former BlackRock Inc. portfolio manager Mark Lyttleton was sentenced to a year in prison for insider trading by a London judge, becoming the latest high-profile finance figure to face jail for the offense.
The 45-year-old pleaded guilty to two counts of insider trading last month. He was ordered to pay about 230,000 pounds ($284,000) in confiscation and costs by the court Wednesday after making 35,000 pounds trading shares of two energy companies.
Lyttleton was arrested along with his wife, Delphine, at their west London home in 2013 as part of an investigation, known as Operation Rye, by the U.K. Financial Conduct Authority. His wife was dropped from the probe in 2015. The ex-portfolio manager, who was based in the company’s London office, ran funds including the BlackRock U.K. Dynamic Fund and the BlackRock U.K. Absolute Alpha Fund, once overseeing as much as $4.5 billion, his lawyer said.
"There’s no doubt in my mind that this defendant knew what he was doing," Judge Andrew Goymer said while handing down the sentence. But "it remains a mystery" why he did it.
Wearing a dark suit and blue, spotted tie, Lyttleton stared straight ahead in the packed courtroom as the sentence was read out. He carried a large, black duffel bag as he left the dock, escorted by a security guard, as family and friends comforted each other in the public gallery.
Lyttleton wants to say "very publicly he’s sorry to the court and to all those whom he’s let down," his lawyer, Patrick Gibbs, told the court Wednesday. "He has embarrassed his wife, he has embarrassed his family," his former employer and colleagues.
EnCore Oil, Cairn
Lyttleton was charged with three counts of insider dealing in September, later reduced to two at his plea hearing. He was convicted for trading shares of EnCore Oil Plc in October 2011 ahead of news about a proposed takeover and, a month later, Cairn Energy Plc, using information gained from his job at BlackRock. The vacated third count related to trading in electrical company Pursuit Dynamics LLC, according to a copy of the original indictment. He made about 45,000 pounds from the EnCore trading and lost about 10,000 pounds on Cairn, his lawyer said.
The prosecution told the court Lyttleton had executed the trades through Swiss firm Caldwell & Partners using a Panamanian company set up under his wife’s name. In both instances, EnCore and Cairn were on BlackRock’s ‘stop’ list, which meant the firm had been wall-crossed -- given inside information -- on the companies and its employees weren’t allowed to trade in them. While Lyttleton wasn’t working on the deals, he became aware of them through colleagues.
Caldwell didn’t immediately respond to phone and e-mail messages requesting comment at contact details located on the internet. BlackRock, in an e-mailed statement, said “there was no impact to any of BlackRock’s clients as a result of the alleged actions.”
When the FCA arrested Lyttleton they found two pay-as-you-go cell phones in his house that only contained one number -- Caldwell’s -- listed under the names ‘George’ and ‘Fred.’ While the phones were purchased after the insider trading had taken place, Lyttleton’s lawyer said he’d bought them because Philip Caldwell, the founding partner, alerted him to inquiries about the EnCore and Cairn trades made by the FCA and told him to buy them. The prosecution said no other party than Lyttleton was accused of any wrongdoing.
Lyttleton met Caldwell, with whom he had a discretionary portfolio for a number of years, at various times in 2011 and 2012 over lunch and at his house and handed him as much as 60,000 pounds in cash a time, according to the prosecution.
He has become a life coach, angel investor and Reiki practitioner since leaving BlackRock, according to his LinkedIn profile.
"I have experienced many highs (excelling at work) and lows (being arrested) and the understanding I try to share can be beneficial to people in all positions, in all walks of life," Lyttleton says on the social media page. "Since leaving the financial services industry in 2013, I have been working on my own personal development which has taken me in a number of different directions."
Gibbs told the court how his client had been struggling with personal and professional problems at the time of the insider trading, after the funds he was managing at BlackRock dropped significantly in value and investors started making withdrawals, leaving him in a state of "mental freefall." He took a three-month sabbatical in June 2012 before deciding to leave BlackRock in March 2013 with a "generous settlement," all of which was withdrawn after his arrest.
Speculating about why Lyttleton, who had worked in finance for 21 years, was very wealthy and was considered "a star" at BlackRock at one point, would commit such a crime, Gibbs said the only reason one could come up with was that he "had been rendered powerless" by his difficulties at work and home.
The case marks another success for the FCA in its clampdown on insider trading over the last decade. Prior to 2009 the regulator had never criminally prosecuted anyone for the behavior. In 2016 alone, a former equities trader at Schroders Plc was given two years in prison after pleading guilty to the offense, while a record 4 1/2-year prison term was handed to ex-Deutsche Bank AG corporate broker Martyn Dodgson in May. The FCA has secured 31 convictions in total for the offense.
“Lyttleton’s insider dealing involved a gross abuse of the trust placed in him as a senior fund manager,” Mark Steward, the FCA director of enforcement, said in a statement. “Those who are tempted to insider deal, especially financial industry professionals, must know now they are more likely to be caught than ever before and, when caught, they will likely face a custodial sentence.”