Four men who worked for the investment banking firms Houlihan Lokey Howard & Zukin and Chanin & Co. LLC and one outsider have been charged in an insider-trading ring that prosecutors said netted $970,000.
Four of the five have agreed to plead guilty of conspiring to commit securities fraud and wire fraud. The fifth, Robert Yuen Joo, a former analyst at Houlihan Lokey, was indicted Tuesday by a federal grand jury in Los Angeles. He surrendered this morning and is expected to appear in court this afternoon.
Joo is charged with eight counts of conspiracy to commit securities fraud and wire fraud, four counts of securities fraud and conspiracy to obstruct a Securities and Exchange Commission investigation. He also faces two counts of making false statements to the SEC and the Federal Bureau of Investigation, which handled the case. He faces 55 years in federal prison if convicted.
According to the U.S. Attorney’s Office in Los Angeles, Joo shared non-public information from Houlihan concerning the mergers of three of its clients with his roommate, Doseph Joshua Shin, an analyst at Chanin. Shin is accused of using the information to make trades, paying kickbacks to Joo. Shin is also accused of tipping two other defendants, Ernesto Sibal, an associate at Chanin, and Chae-Hyon “Jason” Chin, a small business owner, who then traded with the non-public information.
The three mergers on which the information was based were: The DeWolfe Companies Inc.’s 2002 sale to NRT Inc., a subsidiary of Cendant Corp.; Prime Retail Inc.’s 2003 sale to the Lightstone Group; and Airborne Inc.’s 2003 sale of its ground operations to DHL Worldwide Express B.V.
Shin also is accused of using non-public information concerning Genesis Health Ventures Inc.’s 2002 acquisition of NCS Healthcare Inc., whose bondholders were represented by Chanin. He is accused of tipping off Joo, who is accused of passing it on to the fifth defendant, Benjamin Chiu, an associate at Houlihan Lokey who traded with the information.
Aside from Joo, the four defendants face five years in prison and a fine of about $2 million. The four defendants already have paid a total of $1.1 million in disgorgement and penalties to the Securities and Exchange Commission, which filed suit over the matter. Joo, also named in the SEC suit, has not settled.
