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Former Stock Broker Escapes Jail Time

Federal investigators and prosecutors have been working for the past five years to wrap up a securities fraud case involving stockbrokers and day traders. The case alleges that Smith Barney brokers and A.B. Watley day traders were involved in a scheme that allowed the day traders to listen in to "squawk box" conversations by stock brokers.

The federal securities investigation looked into the actions of many people, only two of whom cooperated with prosecutors. Like most securities litigation, this lawsuit has taken many years to reach trial. Although there are still trials and appeals yet to go, the case against one cooperating stockbroker has reached an end.

Prosecutors say that this stockbroker allowed day traders at A.B. Watley to eavesdrop on conversations between brokers that took place on the so-called "squawk box." Those day traders gave him cash bribes in return. He pleaded guilty to conspiracy to commit securities fraud in 2005.

Prosecutors described his cooperation as "significant to this prosecution because it provided the government with witnesses and information from inside the brokerage firms about how the scheme was executed." His cooperation led to the conviction of six other people: three brokers and three day traders. Those individuals are expected to appeal the decision, and the cooperating stockbroker has allegedly agreed to provide testimony for the prosecution if it is requested.

As is often the case, this stockbroker's cooperation with the prosecutors paid off. He avoided jail time and was only ordered to pay a $500 fine.

Source: Wall Street Journal, "'Squawk Box' Case Witness Receives No Jail Time," Chad Bray, 9 Sept 2010

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