Friday, May 15, 2009

Ex-Ernst & Young Partner Convicted of Insider Trading

James Gansman, who was a partner at Ernst & Young LLP, was convicted of six federal insider-trading charges.

A federal jury in Manhattan today also acquitted Gansman of three insider-trading counts and conspiracy. He faces more than 20 years in prison when sentenced Oct. 1. He is free on bail. His accomplice, Donna Murdoch, a managing director at a Philadelphia-based broker-dealer, pleaded guilty in December.

Prosecutors said Gansman tipped Murdoch about seven merger and acquisitions transactions involving Ernst & Young clients, generating illegal profits of more than $300,000. They said in court papers that he provided the information to her “because of their close and personal relationship,” knowing she’d buy and sell securities.

The case was part of a U.S. crackdown on insider trading. Prosecutors have won convictions of ex-employees at firms including Bear Stearns Cos., Morgan Stanley, UBS AG and Lehman Brothers Holdings Inc.

Regulators have also targeted wrongdoing by accounting-firm employees. On May 7 four current and former executives of Ernst & Young were found guilty by federal jurors in New York of selling illegal tax shelters to wealthy clients.

Gansman was convicted of tipping Murdoch about transactions involving Freescale Semiconductor Inc., Spectralink Corp., K2 Inc., and others in which she bought options after learning of pending deals.

Defense Lawyer

Defense attorney Barry Bohrer didn’t immediately return a call.

Gansman, who is also a lawyer and who lives in Manhattan, was a partner in Ernst & Young’s transaction-advisory services department and served as engagement partner for human resources- due diligence.

According to prosecutors, he learned of the pending acquisitions through the firm’s work as adviser to Blackstone Group LP, the world’s biggest buyout company, and other acquirers. The scheme ran from 2005 to 2007, prosecutors said.

Murdoch, who lives in Malvern, Pennsylvania, until last year was the president of Glycology Inc., a nutritional- supplement company. She was also founder of a consulting firm that specialized in mergers, the Securities and Exchange Commission said in a related civil lawsuit.

The civil case is SEC v. Gansman, 08-cv-4918, and the criminal case is U.S. v. Gansman, 08-cr-471, U.S. District Court, Southern District of New York (Manhattan).