The often-complex world of insider trading allegations that can be of concern to corporate executives in Pennsylvania and elsewhere is also coming to Washington, D.C. While the political culture of the nation's capital often involves an array of leaks and rumors, typically these involve journalists and lobbyists rather than investors. However, some firms, known as political intelligence companies, are making large sums of money by selling information to hedge funds about upcoming government actions. With this advance knowledge, the funds can make millions by selecting stocks that will soon rise or fall based on expected government actions.
Typical insider trading prosecutions often involve people directly employed by or otherwise connected to the company whose securities are being traded for personal benefit. This type of white-collar crime accusation has affected a range of investment companies as well as corporate executives in some high-profile cases. However, the Washington insider cases involve a person with current ties to or former government employment experience being paid to disclose information about upcoming policy changes with implications for stock prices.
In one case, a former government health care official with ties to currently employed officials was paid around $832,000 to disclose details about upcoming regulations. These new policies would raise payments for some treatments and reduce them for others. One hedge fund made over $3.5 million in securities trading based on these tips. The hedge fund officials and former government employees are facing charges for their role in the trades.
Allegations of white-collar crime not only carry severe criminal penalties, they can also put an end to a career or strip away significant amounts of income. The evidence involved in such cases can often be voluminous and complex. A criminal defense lawyer can work with people accused of white-collar crimes or involved in an ongoing investigation to defend themselves accurately and prevent prosecutions from moving forward.
Source: Bloomberg, "Washington Leak Culture Meets Wall Street's Insider-Trading Cops," Bob Van Voris and Drew Armstrong, March 29, 2018