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7/29/2019 Montieth & Company Insider Trading Study Release 1-16-13
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For Immediate ReleaseMedia Contacts:
Shannon Flagg, Montieth & Co.
212.284.7629
Lindsay Garber, EchoDitto
202.285.9455 Ext. [email protected]
The Socialization of Crime: How the FacebookGeneration Approaches
Insider Trading
Montieth & Company Study Reveals The Impact of Social Networking
New York, NYJanuary 16, 2013Montieth & Company (www.montiethco.com), a
specialist communications consultancy, announced today the preliminary findings andrecommendations from its first annual Litigation & Communications Series study, The
Socialization of Crime: Insider Trading in America.
This first study in the series looks at the current generation of insider trading cases, including
those involving Raj Rajaratnam of the Galleon Group and Steven A. Cohens SAC Capital
Advisors, and compares and contrasts each with major, prior investigations and prosecutions
going back to the 1980s.
The core finding: insider trading has become socialized.
The core recommendation: social networking tools can be used by companies to educate
employees, and the business partners they interact with, about the securities laws and raise thelevel of ethical behaviors and compliance.
Every generation commits crimes in its own, unique way and when you look at the people whoengaged in insider trading today you can see the patterns of what we term intra-social
networking, says Montieth M. Illingworth, President. This is insider trading in the age of the
Facebook Generation.
This stands in marked contrast to the structure and patterns of interaction engaged in by prior
generations, most notably what the study refers to as the Mastermind Model of the major cases
in the 1980s. For example, the study contrasts the Galleon Cohort as the most symbolic of theintra-socially networked groups among the current cases, with the example of Dennis Levine, the
former Drexel Burnham Lambert executive who ran an insider trading scheme in the 1980s.
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Comments Illingworth: Social networking, whether seen as a way ofinteracting with others, as
its own set of individual behaviors, or a technology-based tool set, or all of the above, didnt
cause people to engage in insider trading, but it can be part of the solution for ensuringcompliance with the securities laws.
The solution Montieth & Company proposes will be developed in partnership with EchoDitto,(www.echoditto.com) a leading digital consultancy that focuses on using innovative open source
technologies to build and empower communities and is known for its work using technology to
create transparency and accountability.
Social platforms are here to stay, and the culture of sharing and connecting is now the status
quo. While investment firms will never be able to control where their portfolio managers and
traders talk to one another, they can create an environment that fosters ethical behavior throughactive and passive functionality, says Nicco Mele, founder of EchoDitto.
While there have been hundreds of criminal and civil prosecutions of insider trading in recent
years, the Montieth & Company study focuses primarily on the 76 individuals that have beencharged since August, 2009 when Preet Bharara was sworn in as U.S. Attorney for the Southern
District of New York. Of those 76 individuals, U.S. Attorney Bharara has succeeded inconvicting, so far, 71. There is every indication he will continue to bring additional insidertrading charges, which the study concludes will result in the possible expansion of existing
cohort groups and new ones being revealed.
Highlights from The Socialization of Crime: Insider Trading in America include:
All of U.S. Attorney Bhararas 76 cases can be divided into eight separate intra-socially networked groups, the largest involving Galleon with 33 individuals. The
Galleon Cohort is the paradigm for all the others, says the report. There are at least six other intra-socially networked groups of defendants that were
prosecuted by U.S. Attorney Bhararas predecessors or by other U.S. Attorneys in
other jurisdictions in a similar timeframe.
Those individuals connected to Steve Cohens SAC Capital Advisors signifies a newcohort that could emerge pending further investigation by U.S. Attorney Bharara.
As it stands, there are already nine defendants associated with SAC.
With each group there is no one individual, no mastermind, a Dennis Levine, IvanBoesky or Martin Siegel, orchestrating the scheme from the top of a hierarchical
power structure. In todays intra-socially networking model, the power and influence is
distributed more democratically across a complexly interconnected network.
Over 50% of the people charged by U.S. Attorney Bharara were between the ages of31 and 40.The average age of all people charged is 42.A number of these peoplewere just coming out of graduate school when Facebook launched, says the study.
They grew up in their professional lives with social networking as a model forinteracting with others, for creating bonds and exchanging information.
Looking across all cases, there were 11 different types of organizations involved, i.e.,hedge funds, banks, corporations, expert networks, etc. This represents a greater
diversity of the types of companies than in any prior generation of insider trading cases.
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In the 1980s, the cases were focused on investment bankers, especially those involved in
M&A.
Expert networks are a specific expression of the new model. An expert network is bydefinition a variation ofa social networking model, says the study.
The study will also address the question of what the emergence of intra-socialnetworks in insider trading means about the state of corporate compliance. Socialnetworking can have the force of nature. It is imperative that organizations take a closer
look at how to make social platforms more of a central part of their compliance systemsand a reflection of a corporate culture being held to the highest standards of ethical
conduct, argues the study.
The completed study, which will include recommendations and social media solutions developed
in partnership with EchoDitto, will be issued in 2013.
A summary of the various cohorts that have been defined and a summary of the data series
captured in the study are available by contacting Shannon Flagg, Associate, Montieth &
Company, 212.284.7629 or via email [email protected]. Flagg is lead researcher ofthe study.
About Montieth & Company
Montieth & Company is a strategic communications consultancy dedicated to enabling
organizations to seize opportunity, achieve their core objectives, and successfully prevail in theface of their most critical challenges. Montieth & Company provides its clients with specialist
expertise in marketing communications, corporate and financial communications, litigation
communications, and issues and crisis management. Montieth & Company is headquartered in
New York, NY and maintains affiliate relationships with agency partners in Boston, Washington
DC, London, Zurich, Berlin, Dubai, Hong Kong, Beijing, Shanghai, Singapore, Seoul, Sao Pauloand throughout Latin America. More information can be found atwww.montiethco.com
About EchoDitto
EchoDitto specializes in designing and building participatory campaigns and citizen engagement
strategies for our clients. After converting creative vision into actionable blueprints andworkplans, we provide a full spectrum of digital services, from high-end Drupal development,
systems integration, as well as online communications, marketing, and organizing support. We
have deep experience implementing and integrating open source technologies and we are
pioneers and active participants in the Drupal community. With offices in Washington, DC andBoston, we guide leading social change organizations and social enterprises through their use of
connected media and emerging technologies to help solve the worlds greatest challenges and
make a positive impact. More information can be found atwww.EchoDitto.com
mailto:[email protected]:[email protected]://www.montiethco.com/http://www.montiethco.com/http://www.montiethco.com/http://www.echoditto.com/http://www.echoditto.com/http://www.echoditto.com/http://www.echoditto.com/http://www.montiethco.com/mailto:[email protected]