By Chad Bray Of DOW JONES NEWSWIRES NEW YORK -(Dow Jones)- Prosecutors have agreed to drop the remaining criminal charge against a former A.B. Watley Inc. executive in exchange for his cooperation in an alleged scheme to misuse brokerage firm "squawk" boxes.
The U.S. Attorney's office in Brooklyn has reached a deferred prosecution agreement to drop a conspiracy charge against Michael A. Picone, the defunct day-trading firm's one-time chief operating officer, as long as he cooperates with the government.
The agreement was made public at a court hearing in Brooklyn on Tuesday and confirmed by his lawyer and a spokesman for the U.S. Attorney's office late Tuesday.
"It's been a long three years for Mike Picone and his family," said J. Bruce Maffeo, Picone's lawyer. "It's the right result. We're happy to put this behind us and move ahead."
A retrial against a group of three former A.B. Watley Inc. executives and three ex-securities brokers at Bank of America Corp.'s (BAC) Merrill Lynch unit, Citigroup Inc.'s (C) Smith Barney unit and Lehman Brothers Holdings Inc. is expected to be heard beginning in February.
Maffeo said his client has been prepared to cooperate with prosecutors since the beginning of the proceedings. Maffeo said the decision on whether his client will testify at the retrial is up to prosecutors.
Prosecutors have alleged that three ex-brokers placed open telephone lines next to the internal speaker systems at their companies so that Watley day traders could secretly eavesdrop on block orders by institutional clients.
The day traders would then use that information to front-run, or improperly jump ahead of client orders, the government said. The brokers were bribed with cash and "wash" trades, transactions designed simply to generate a commission, prosecutors said.
In May 2007, a jury delivered a partial verdict in the case, and a mistrial was declared after the jury failed to reach a verdict on the conspiracy count. The jury convicted ex-Merrill Lynch broker Timothy O'Connell of witness tampering and making a false statement, but acquitted O'Connell and six others of securities fraud and other charges in the matter.
In July, the 2nd Circuit Court of Appeals said that prosecutors could proceed with a retrial of the men on a single count of conspiracy to commit securities fraud.
At the time, the appeals court also overturned O'Connell's conviction of making a false statement and ordered a new trial on that count, citing an improper instruction to the jury. The circuit upheld his conviction on a witness tampering count.
O'Connell was sentenced to a year and a day in prison on the charges last year and completed his prison term in February.
The defendants are Kenneth Mahaffy, a former Merrill Lynch and Smith Barney broker; O'Connell; David G. Ghysels Jr., a former Lehman broker; Robert Malin, A.B. Watley's former president; Linus Nwaigwe, Watley's ex-director of compliance; and Keevin H. Leonard, who at one time supervised and trained Watley's day traders.
-By Chad Bray, Dow Jones Newswires; 212-227-2017; chad.bray@dowjones.com
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Publié le 13 janvier 2009 Copyright © 2009 Dowjones