Five face jail over insider trading scam

A former vice-president at Credit Suisse First Boston, who worked in the investment banking giant’s confidential “control room” in London, and four other men were yesterday convicted on insider trading charges at Southwark crown court.

The case is believed to be the first successful prosecution for insider trading, where price-sensitive information was passed to a group of associates who used it to place “spread bets” rather than take positions in shares themselves.

Prosecutors told jurors that Asif Butt, a former vice-president, was the “man on the inside” who passed price-sensitive information about the bank’s clients to an insider-dealing ring.

Opening the trial, James Curtis QC said that Mr Butt had worked in “a particular position of trust and responsibility” as an officer in CSFB’s legal and compliance department. He was “in the hub of the secure zone” and had regular access to the “watch list”, which detailed confidential situations involving companies that CSFB was advising.

The prosecution claimed that the information-passing started shortly after Mr Butt started work in the control room. They alleged that he tipped off four others – Ian Beale, Richard Judson, Daniel Masters and Alexander Coleman – all of whom were unconnected with the bank.

The men, who prosecutors claimed used nicknames like Walrus, Jackal, Jaffa and Flopsy, then either traded shares directly or placed spread bets with firms including City Index, IG Index and Cantor Fitzgerald.

The lion’s share of the winnings from these transactions was subsequently passed back to Mr Butt, with Mr Beale keeping a tally on his computer.

“The spoils were carefully divided between them,” Mr Curtis told jurors when the case opened, with Mr Butt’s share “averaging” 50-80 per cent of the profits.

The scam, the lawyer explained, came to light when the spread betting firms alerted the Financial Services Authority which, in turn, called in the City of London police.

The five men were formally charged with one count of conspiracy to commit insider dealing between August 1998 and mid-January 2002 when they were arrested. There were also four identical charges, alleging an insider-dealing conspiracy between Mr Butt and the four men separately.

The five men could face jail when sentencing takes place next month. “Every defendant should be well aware that custody is probably uppermost in the court’s mind in relation to these extremely serious matters,” Judge Christopher Elwen warned them yesterday.

Sentencing is scheduled for January 28, when pre-sentence reports will have been prepared. The men remain on conditional bail until then. All five denied the charges against them.

Jurors deliberated for four days, before reaching yesterday’s decision. Throughout the trial, CSFB said it would be inappropriate to comment during legal proceedings but stressed the bank had co-operated fully with police.

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