Thursday, May 10, 2007

Partial Not Guity Verdict in Squawk Box Trial

A federal court criminal jury in Brooklyn came to a partial verdict today in the Squawk Box trial - not guilty on all of the securities fraud charges. The jury remained deadlocked on the conspiracy charge.

Prosecutors accused former stock brokers at Merrill Lynch, Citigroup and Lehman Brothers of taking bribes in exchange for allowing day traders at the now-defunct broker-dealer A.B. Watley Inc. to listen to their firms' squawk boxes through open telephone lines. The traders thereby obtained information regarding large blocks of stock that were being purchased or sold, and traded on the basis of that information, which is known as front-running.

The only guilty verdict was against a former Merrill broker, who was accused of participating in the scheme and telling his assistant to lie to government investigators about it. He was found guilty on one count of witness tampering and one count of making false statements.

While there is still a civil case pending by the SEC, the verdicts are yet another example of a potential defendant being acquited of the substantive charges and being convicted of lying to investigators. Can you say "Martha Stewart"?
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