Insider Trading Scheme Results in Charges

An insider trading scheme has blown up in the face of two friends, Steven V. McClatchey and Gary J. Pusey.

McClatchey, a former director at Barclays, was arrested earlier this week after being charged with insider trading. McClatchey is accused of passing off non-public information to his friend, Gary J. Pusey, who pled guilty to a number of different charges earlier this week.

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After becoming friends with Pusey in 2011 or 2012, the SEC alleges that McClatchey decided that he would start furnishing his friend with insider trading tips. McClatchey allegedly provided tips to his friend regarding acquisitions involving the following companies:

Forest Oil
Questcor
Zygo
Pepco
Measurement Specialties
Entropic
PetSmart
Emulex
Omnicare
TECO

After making money from the first couple of trades, the SEC and DOJ allege that Pusey started repaying his friend's kindness in the form of bags full of cash and the free remodeling of McClatchey's bathroom. The two friends must have thought themselves invincible, executing a total of 10 illicit trades before the Feds closed in. Despite taking steps to disguise their scheme, McClatchey and Pusey were eventually caught after the government noticed Pusey's extremely prescient stock picks.

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In similar stories, the perpetrators normally walk away with millions of dollars before getting caught by the government.

In this case, however, the Pusey/McClatchey scheme netted just $76,000 in profits. Pusey clearly didn't have all that much money to trade, choosing to usually put between $20,000 and $40,000 into the trades.

It seems ridiculous that McClatchey, a director at Barclays, would risk losing his job and being thrown into jail for a few thousand dollars. That is exactly what happened, however, and now both Pusey and McClatchey are facing jail.

Source: SEC.gov

Filed under: General Knowledge