CHARLOTTE, N.C. -- A former Wells Fargo investment banker was arrested Thursday, accused of stealing information on pending mergers and acquisitions from the bank and using it to lead an insider trading ring, the office of the U.S. Attorney for the Western District of North Carolina said.
The indictment, returned by a grand jury in Charlotte on Wednesday, provides new details on an investigation that came to light last week, when the Securities and Exchange Commission filed charges in civil court.
Investigators said John W. Femenia, 31, used his position at Wells Fargo to find out about upcoming deals, then tipped off friends and business partners so they could buy stock in the companies involved. He then received kickbacks from them in cash and gold bars, the indictment says.
Participants in the scheme tried to launder money made on the trades by buying and selling gold bars and running some through Las Vegas casinos, according to the indictment.
In total, the ring made $11 million by trading on private information, investigators said.
Femenia, who lived in Charlotte during much of the alleged insider trading but recently moved to New York, was charged with conspiracy to commit insider trading, conspiracy to commit wire fraud, securities fraud and money laundering. He was arrested in New York.
“We are pleased that John has been released on bond and are in the process of analyzing the indictment,” Femenia’s attorney, Scott Morvillo, said. “We’ll have a further statement at the appropriate time.”
Wells Fargo said Femenia is no longer employed at the bank, and that it is still cooperating with the SEC and the U.S. attorney’s office.
“Wells Fargo has robust policies and training programs in place on the handling of confidential information, and we have a zero-tolerance policy for the misuse of such information,” the bank said in a statement.
Others face charges
Shawn C. Hegedus, 32, and Danielle C. Laurenti, 31, both of New York, also face insider trading, wire fraud, securities fraud and money laundering charges. Hegedus received insider information from Femenia and later passed it on to others, according to the indictment. Laurenti, Hegedus’ girlfriend, also traded on the information and helped arrange kickbacks, the indictment says.
6 agreed to guilty pleas
Six other people accused of receiving tips have agreed to plead guilty to conspiracy to commit insider trading, the office said. The plea deals have been filed in federal court.
The six who agreed to plead guilty were Frank M. Burgess, Jr., 42, and James A. Hayes, 38, both of Charlotte; as well as Matthew J. Musante, 32, of Miami, Fla.; Aaron M. Wens, 32, of Encinitas, Calif.; Roger A. Williams, 51, of Georgetown, S.C.; and Kenneth M. Raby, 50, of Greer, S.C.
In four different acquisitions – beginning in early 2010 and lasting through summer 2012 – Femenia allegedly stole information about the deals and provided it to the network of friends and business partners.
In each case, the ring bought stock in a company to be acquired, the indictment says. The price rose dramatically when the deals were announced.
The indictment also accuses Femenia and Hegedus of fraudulently taking out a $900,000 mortgage to purchase a luxury home in the Chatelaine neighborhood of Waxhaw for Hegedus. Investigators said Femenia used his name and false salary and employment information to obtain the loans.