At a panel on insider trading Wednesday night, SEC San Francisco branch chief Marc Fagel and Berkeley defense lawyer Cris Arguedas agreed that making a case on illegal money making becomes much, much simpler when the target is caught lying about it. Proving a lie to the SEC is relatively easy, Fagel said, and is much more likely to draw the interest of the Justice Department.
In general, Fagel said he doesn’t call in federal prosecutors when individuals are cooperating and sharing documents. But when the information isn’t flowing, Fagel said the FBI is much better at pressuring lower level people to flip and lead them up the chain. Also, the feds might be called if the facts are particularly egregious and paying a penalty is insufficient, Fagel said, as in the case of lying, or if the illegal trading involves a general counsel or board member.
Still, Fagel characterizes those cases as very rare. Sometimes, though, the SEC might file something publicly without notifying prosecutors ahead of time, and Fagel will get a call from Adam Reeves, securities chief in the U.S. Attorney’s office, expressing interest.
Arguedas smiled. “He thinks, ‘Oh, that looks like fish in a barrel,’” she said.
Wiretaps also came up, because prosecutors in the huge Galleon insider trading case used them to great effect. Arguedas expressed extreme skepticism at defense lawyers’ challenges to the taps. But even if they’re successful, the government still has recordings made consensually by witnesses, she said, which are also very difficult to toss out of court.
— Dan Levine
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