Former Ernst & Young Partner & Investment Banker Charged in Insider Trading Scheme – US Attorney

LAWFUEL – Legal Announcement Service – MICHAEL J. GARCIA, the United States Attorney for the
Southern District of New York, and MARK J. MERSHON, the Assistant
Director-in-Charge of the New York Office of the Federal Bureau
of Investigation (“FBI”), announced today the unsealing of an
indictment charging former Ernst & Young, LLP (“E & Y”) partner
JAMES GANSMAN and investment banker DONNA MURDOCH with
participating in a scheme to trade on inside information about
seven separate, potential merger and acquisition transactions
involving E & Y clients. GANSMAN, who in his capacity as a
partner at E & Y obtained confidential, non-public information
about the potential transactions, passed the inside information
to MURDOCH, who in turn traded on the information, gaining more
than $390,000 in profits. GANSMAN was arrested earlier today in
New York City, and MURDOCH is expected to surrender to federal
authorities. According to the twelve-count Indictment unsealed
in Manhattan federal court earlier today:

From May 2006 through December 2007, E & Y was engaged
to advise various entities in connection with mergers and
acquisitions (the “E & Y Transactions”) involving seven publicly
traded companies — ATI Technologies, Freescale Semiconductor,
Portal Player, Spectralink, K2, Dade Behring, and Activision (the
“Counterparties”). GANSMAN was the partner at E & Y in charge of
the human resource consulting services that E & Y provided for
the E & Y Transactions. In that capacity, he obtained
confidential, inside information about the transactions, and
regularly leaked the inside information to MURDOCH. GANSMAN
typically communicated with MURDOCH at some point after he had
been assigned to work on a transaction but before the subject of
that particular transaction had been publicly and officially
announced.

After receiving the confidential information from
GANSMAN, MURDOCH purchased securities of the Counterparties
involved in the particular transaction, and, following public
disclosure that a Counterparty was being acquired, sold the
previously purchased securities. Her trading in the securities
of each of the Counterparties earned total profits of more than
$390,000.

For example, on June 23, 2006, GANSMAN learned that
E & Y had been retained by a private equity firm, the Blackstone
Group (“Blackstone”), in connection with a possible acquisition
of Freescale Semiconductor by an investment consortium led by
Blackstone. At that time, GANSMAN was informed that Blackstone
wanted the transaction to be “treated superconfidential,” and was
told in an internal E & Y email message, “[d]o not breathe the
name of the target outside of team.” Nonetheless, GANSMAN
provided MURDOCH with inside information about the impending
transaction.

GANSMAN and MURDOCH communicated over 400 times via
telephone and text message from the time that GANSMAN learned of
the acquisition to the time, less than four weeks later, when
MURDOCH began buying options to purchase Freescale Semiconductor
stock. MURDOCH continued to buy options to purchase Freescale
Semiconductor until September 8, 2006. On September 11, 2006, a
wire service reported that Freescale Semiconductor would be
acquired, and on September 15, 2006, Freescale Semiconductor
publicly announced the acquisition. On September 11 and 12,
2006, MURDOCH sold approximately 690 Freescale Semiconductor
options and profited more than approximately $158,000 from her
trades.

GANSMAN and MURDOCH are each charged with one count of
conspiracy to commit securities fraud and eleven counts of
securities fraud. The conspiracy charge carries a maximum prison
term of 5 years and a maximum fine of the greater of $250,000, or
twice the gross pecuniary gain or loss from the offense. Each of
the securities fraud counts carries a maximum prison term of 20
years and a maximum fine of the greater of $5 million or twice
the gross pecuniary gain or loss from the offense.
GANSMAN, 48, resides in New York, New York. MURDOCH,
44, resides in Malvern, Pennsylvania. GANSMAN is scheduled to be
arraigned today at 3:30 p.m. by United States District Judge
MIRIAM GOLDMAN CEDARBAUM.
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Mr. GARCIA praised the work of the FBI and thanked the
U.S. Securities and Exchange Commission for its assistance in
this investigation. He added that the investigation is
continuing.

“JAMES GANSMAN exploited his position of trust to trade
on inside information about seven mergers and acquisitions of
publicly traded companies,” said United States Attorney MICHAEL
J. GARCIA. “Together he and DONNA MURDOCH provide the latest
example of those who seek personal gain at the expense of public
trust in our markets.”

“Trading on material, non-public information is illegal
because of the inherently unfair advantage such information
provides,” said FBI Assistant Director-in-Charge MARK J. MERSHON.
“And the unfair advantage exists as much for someone who trades
on information passed along by an insider as it does for the
insider who acquires it first-hand.”

Assistant United States Attorneys ANTHONY S. BARKOW and
NICHOLAS S. GOLDIN are in charge of the prosecution.
The charges contained in the Indictment are merely
accusations and the defendants are presumed innocent unless and
until proven guilty.
08-128 ###

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