The Securities and Exchange Commission today charged a former Deloitte Tax LLP partner and his wife with insider trading, alleging that the pair leaked confidential information about pending mergers and acquisitions to relatives in England.
According to the SEC, Arnold McClellan and his wife, Annabel, who live in San Francisco, provided advance notice of at least seven confidential acquisitions planned by Deloitte's clients to Annabel's sister and brother-in-law. The brother-in–law, who co-owns a London-based trading firm, then took financial positions in the companies, reaping about $3 million in profits, to be split 50/50 with Annabel.
The U.K. Financial Services Authority announced charges against the two relatives — James and Miranda Sanders of London. The FSA also charged colleagues of James Sanders with acting on illegal tips. Sanders's tippees and clients allegedly made approximately $20 million by trading on the inside information.
Confidential deals allegedly revealed by McClellan between 2006 and 2008 include:
Kronos Inc., a Massachusetts-based data collection and payroll software company acquired by a private equity firm in 2007.
aQuantive Inc., a Seattle-based digital advertising and marketing company acquired by Microsoft in 2007.
Getty Images Inc., a Seattle-based licenser of photographs and other visual content acquired by a private equity firm in 2008.
In a complaint filed in U.S. District Court for the Northern District of California, the McClellans are charged with violating the antifraud provisions of the federal securities laws. The complaint seeks permanent injunctive relief, disgorgement of illicit profits with prejudgment interest, and financial penalties. Additional criminal charges may follow.
Arnold McClellan is represented by Keker & Van Nest partners Elliot Peters and Christopher Kearney. Peters did not immediately return a call seeking comment. Annabel McClellan is represented by Nanci Clarence of Clarence & Dyer, who also could not be reached for comment.
SEC lawyers Marc Fagel, Michael Dicke, Robert Tashjian, Lloyd Farnham, Victor Hong and Alice Jensen are representing the agency.
"The McClellans might have thought that they could conceal their illegal scheme by having close relatives make illegal trades offshore. They were wrong," said Robert Khuzami, director of the SEC's Division of Enforcement in a written statement. "In this day and age, whether it's across oceans or across markets, the SEC and its domestic and foreign law enforcement partners are committed to identifying and prosecuting illegal insider trading."