Insider trading is always about broken confidences, but there are degrees of degradation. The lowest of the low may have come today, when a financial advisor was accused by the SEC of trading on information gleaned through Alcoholics Anonymous.
The accused is Timothy McGee, a registered representative of Ameriprise Financial Services AMP . According to the complaint, McGee met a senior executive of Philadelphia Consolidated Holding Corp. in 1999, through AA. The two remained close throughout the next decade, both inside and outside of the 12-step program.
Following an AA meeting in July 2008, the executive allegedly told McGee that he was stressed out by private, confidential negotiations to sell Philadelphia Consolidated. McGee pressed for more information, and learned about the buyer (Tokio Marine), the sale price (3x book) and the timing (soon). According to the SEC, McGee promised the executive that their discussions were of a private nature.
McGee would then make four separate purchases of Philadelphia Consolidated shares prior to the merger announcement. He also is alleged to have tipped off an Ameriprise colleague named Michael Zirinsky, who bought shares for both himself and family members. Zirinsky also is accused of tipping off certain friends in China, who already have settled with the SEC.
McGee would garner over $290,000 from the trades, while Zirinsky and his family would “earn” over $560,000.
The Philadelphia Consolidated is not named as a defendant, even though he’s the one who originally disclosed the confidential information. According to Elaine Greenberg, associate regional director of the SEC in Philadelphia, the executive is treated as a victim because the information was effectively stolen from him:
“As a result of their participation and attendance at various AA meetings, the two of them established a relationship of trust and confidence. And, as a result of that relationship, McGee owed a duty to the insider to maintain what was disclosed to him in confidence and, certainly, not to trade on any information he received from the insider… Misappropriation is a theft.”
An Ameriprise Financial spokesman says that both McGee and Zirinsky have been suspended, following an internal review and cooperation with the SEC.
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