The US investment bank is one of the largest in the world.
(Photo: Reuters)
Frankfurt In the criminal case for insider trading against a former employee of the US investment bank Lazard, the Frankfurt Regional Court has pronounced the verdict: The ex-banker R. received a suspended prison sentence of one and a half years, his accomplice has to go to prison for three years and eight months. According to the Federal Financial Supervisory Authority Bafin, it is the highest prison sentence ever imposed for insider trading.
For the banker, his confession reduced his sentence. The accomplice, an operator of an insurance agency, had denied the deeds despite the overwhelming burden of proof to the last. The public prosecutor’s office had demanded a prison sentence of two years for the banker and four years and ten months for the accomplice.
The convicted duo also has to pay large sums of money: the court ordered the banker to confiscate proceeds of the crime in the amount of 119,000 euros, and 6.4 million euros from the insurance expert who was also accused. According to the court’s findings, he was the main beneficiary of the crimes.
On a total of 27 days of negotiations since April 2021, the Frankfurt Regional Court had heard more than 20 witnesses and three experts. The 14th Criminal Chamber then considered it proven that R. repeatedly passed on details about takeover bids and negotiations from April 2018 to the beginning of 2020. The insurance salesman used this knowledge in six cases to buy and sell shares and derivatives before the takeover plans became public.
Top jobs of the day
Find the best jobs now and
be notified by email.
R’s tasks included supporting takeover negotiations between bidder and target companies, in which Lazard was involved. For example, in April 2019 he was informed about the “Push” project, the planned takeover of Osram Licht by the investors Carlyle/Bain Capital.
He passed on information about this as well as a little later insider knowledge from the “Heritage” project. Under the name, Lazard led a mandate from the Axel Springer publishing group to assess the takeover bid by the financial investor Kohlberg Kravis Roberts & Co. (KKR).
Bafin had already filed criminal charges in seven cases
The Lazard banker informed the accomplices of the respective projects, among other things, about the takeover price to be assessed, the status of the takeover negotiations and the expected ad hoc publication dates. With this special knowledge, share or derivative transactions could be calculated in such a way that, according to the indictment, “every investment of capital for the acquisition paid off several times over at the latest with the sale at the ad hoc point in time”.
Most recently, at the beginning of 2020, information flowed about the “Fruits” project, the examination of a public takeover bid by RIB AG, which specializes in construction software, by Schneider Electric. On February 10, investigators finally struck and searched the accused’s apartments and offices.
For R., the career at Lazard was over. There was administrative offense proceedings against the bank itself, but these were discontinued. The investigation was triggered by a suspicion by the supervisory authority Bafin. She had filed criminal charges in a total of seven cases and “supported the investigation and court proceedings with various statements and witness statements in the main hearing,” as the authority announced in a press release after the verdict. Only in the case of RIB did the suspicion arise after the search.
Apparently, greed was their undoing
The banker R. and his accomplice also suffered from the fact that the insurance salesman obviously did not keep to various agreements. On the one hand, he apparently invested far larger sums than originally agreed. According to the Bafin, the insurance expert is said to have used a total of 8.5 million euros.
In addition, he invested himself and not – as was agreed, according to the confessing banker – through a middleman who is active as a day trader and for whom the frequent, high investments with high profits would probably not have aroused suspicion. This caused the extraordinarily high profit to be noticed. According to experts, this amounted to well over 200 percent on average.
Meanwhile, the case is not over yet. When asked, the public prosecutor’s office confirmed that “more people are being investigated in this area. The investigations are ongoing, and a conclusion to the proceedings is currently not foreseeable.” According to information from the Handelsblatt, two other suspects are being targeted by the investigators.
However, a verdict was reached in another insider trading case that had caused quite a stir in the financial industry. At the end of September, the Frankfurt district court sentenced a former high-ranking manager of the Union Invest fund to three years and six months in prison.
The fund expert was responsible for two of the most important investment funds at Union Investment until late summer 2020. An accomplice who worked in a managerial capacity at the private bank Hauck & Aufhäuser received a suspended prison sentence of one year and ten months.
More: A former star manager at Union Investment has been sentenced to three years and six months in prison