Court States That Insider Trading Must Be
Deterred By A “Robust” Sentence Of 10 Years
MICHAEL J. GARCIA, LAWFUL – Legal Newswire – the United States Attorney for the Southern District of New York, announced today that HAFIZ MUHAMMED ZUBAIR NASEEM, was sentenced to 10 years’ imprisonment for participating in a scheme whereby he stole material, nonpublic information from Credit Suisse and its clients about 9 pending mergers and acquisitions, and tipped an associate about these deals prior to their public announcement. By trading on the basis of this information in several overseas brokerage accounts, NASEEM and the associate netted at least $7.8 million. On February 4, 2008, at the conclusion of a jury trial in Manhattan federal court before United States District Judge ROBERT P. PATTERSON, NASEEM was found guilty of 29 counts of insider trading. Following the verdict, Judge PATTERSON revoked NASEEM’s bail, and NASEEM was remanded into prison.
During the sentencing proceeding today, Judge PATTERSON rejected NASEEM’s request for leniency and added: “This crime has to be deterred by a robust sentence from the Court.” Judge PATTERSON added, “[Insider trading] is going on too much, so people must realize that, if they do get caught, they will pay.” Judge PATTERSON also imposed forfeiture in the amount of $7,500,000, a mandatory special assessment of $2,900, and three years of supervised release. According to the evidence presented at trial:
From September 2005 through March 2006, NASEEM, prior to his employment at Credit Suisse, stole confidential information from J.P. Morgan Chase and its clients regarding potential transactions in the following 8 publicly traded companies: Northwestern Corporation; Huntsman Corporation;
Aramark Corporation; Education Management Corporation; Alliance Data Systems; K2 Inc.; Computer Science Systems; and Engineered Support Systems. He then passed that information along to AJAZ RAHIM, who traded on it in an overseas account in Bahrain.
On March 22, 2006, NASEEM left J.P. Morgan Chase and joined Credit Suisse’s Global Energy Group in the Investment Banking Division. From April 2006 through February 2007, NASEEM stole material, nonpublic information from Credit Suisse and its clients regarding the following 9 publicly traded companies: Northwestern Corporation, Energy Partners, Ltd., Veritas DGC Inc., Jacuzzi Brands, Inc., Trammell Crow Co., Hydril Company, Caremark RX, Inc., John H. Harland Co., and TXU Corp. (these companies are collectively referred to as the “Issuers” and the securities in these companies are collectively referred to as the “Subject Securities”).
Credit Suisse was engaged to advise either the target company or the acquiring entity in connection with business combination transactions involving the Issuers (the “Subject Transactions”). NASEEM, who was not assigned to work on any of the Subject Transactions, repeatedly searched Credit Suisse’s internal computer databases for confidential documents relating to the Subject Transactions, opened and read these documents, and passed the material non-public information concerning the Subject Transactions in these documents to RAHIM (the “Credit Suisse Inside Information”). NASEEM also was observed rummaging through papers on the desks of several analysts when the analysts were not present.
NASEEM provided the Credit Suisse Inside Information to RAHIM in violation of (a) the duties of trust and confidence owed by NASEEM to Credit Suisse and its clients, and (b) Credit Suisse’s written policies, which NASEEM certified he understood, regarding the use and safekeeping of confidential and inside information.
NASEEM typically called RAHIM in Pakistan in advance of a public announcement that a particular Issuer was to be acquired by another entity. He then provided Credit Suisse Inside Information to RAHIM regarding the acquisition in question. Shortly after receiving such a call, RAHIM purchased securities in that Issuer based on the Credit Suisse Inside Information he received from NASEEM. RAHIM purchased the securities weeks before any public announcement was made regarding the Subject Transactions. Following public disclosure that an Issuer was being acquired, NASEEM and RAHIM sold all of the securities that they had purchased, earning millions of dollars in profits.
NASEEM and RAHIM executed dozens of securities transactions, including trades in two offshore accounts, based on the Credit Suisse Inside Information. By the end of February 2007, NASEEM and RAHIM had profited from the trading in each of the Subject Securities and earned from the scheme total profits of more than $7.8 million.
NASEEM, 37, of Westchester County, New York, was found guilty of all 29 counts in the Indictment.
A warrant for RAHIM’s arrest remains outstanding. RAHIM, 45, is a resident of Pakistan. As to him, the charges are merely accusations, and he is presumed innocent unless and until he is found guilty.
Mr. GARCIA praised the investigative work of the Federal Bureau of Investigation and thanked the U.S. Securities and Exchange Commission for its assistance. Mr. GARCIA also thanked Credit Suisse for its cooperation and assistance.
Assistant United States Attorneys JOSHUA KLEIN and REED MICHAEL BRODSKY are in charge of the prosecution.