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Former SEC Enforcement Director Steve Cutler once told a
meeting of the DC Bar Association that "no matter how bad the underlying
conduct, you can always make things worse." At the time Mr. Cutler was talking
about failing to produce documents in a Commission investigation. His remarks
also apply to Peter Talbot and Carl Binette.
Mr. Talbot at one time was employed by the Hartford
Investment Management Company. In April of 2008, his company was engaged in confidential
acquisition talks with Safeco Corporation. Mr. Talbot learned about the
discussions during his employment. He subsequently told his nephew Carl
Binette. Both men opened a brokerage account in Mr. Binette's name. Safeco
common stock and options were bought. Safeco was later acquired not by
Hartford, but Liberty Mutual. Trading profits of $615,833 were made. Both men
were named as defendants in SEC enforcement actions and later settled (here).
Not every insider trading case brought by the SEC becomes
a criminal prosecution. This one did. Uncle and nephew were recently named as defendants in a
seven-count indictment. U.S. v. Talbot, No. 3:10-cr-30036 (D.
Mass.). The indictment contains counts of conspiracy and securities fraud.
Not every insider trading case involves conduct which can
be charged as obstruction of justice. This one did. Mr. Binette is charged with
obstruction of justice for making false statements to the SEC during its
investigation of the insider trading scheme. Mr. Binette apparently made the
bad day of having to face a civil SEC investigation worse - now the charges are
For more cutting edge commentary on
developing securities issues, visit SEC Actions, a
blog by Thomas Gorman.