Two former National Planning Corporation brokers "threw away" their careers by trading on inside information, says a lawyer for one of the men.
"They are just normal dudes and they just screwed up," says Jeremy Warren, the lawyer for Akis Eracleous.
Eracleous and Chad Wiegand, based in San Diego, pleaded guilty to conspiracy to commit securities fraud and insider trading in a federal case in Southern California earlier this month, lawyers for both say. Wiegand's lawyer is Joseph McMullen.
A parallel SEC case accuses the pair of insider trading based on tips that Wiegand received from his brother-in-law, Michael Fefferman. The two brokers have agreed to be barred from the industry, the commission says.
INFO FROM AN IN-LAW
In all, the alleged insider trading between April 2009 and April 2012 resulted in illegal profits of approximately $530,000 to a number of clients and friends of the pair, according to the SEC, which continues to seek disgorgement in the case.
After watching Wiegand struggle to care for his family as a single father, Fefferman tipped him off to a series of anticipated developments at the San Diego-based pharmaceutical company Ardea BioSciences, where Fefferman served as senior director of information technology, according to the federal case. Wiegand then passed those tips along to Eracleous who, in turn, gave them to others.
Fefferman also has been charged in the SEC case with insider trading.
The first tips in 2009 pertained to licensing deals for new drugs including a cancer drug intended to slow the growth of tumors, according to the case. The final tip-off alerted the brokers to the multi-national pharmaceutical company AstraZeneca's plans to purchase Ardea. AstraZeneca publicly announced its intention to acquire Ardea in April, 2012 and completed the deal later that summer.
Eracleous allegedly passed the information on to clients, including a wealthy cousin in New Jersey, who reaped the largest profit.
The cousin, who is named as a relief defendant in the suit, agreed to pay back the entire amount of illicit profits in his account totaling $219,175 in disgorgement and interest, the SEC says. A relief defendant is an individual considered innocent of the central charges in a case but liable for the return of money or goods.
BROKERCHECK REPORTS
Wiegand was "discharged" from National Planning in March 2013 after allegations of exercising trading discretion in a client account, according to his BrokerCheck record. It's not clear if that event is related to the insider trading case.
Wiegand did not return calls for comment nor did Michael Schab, the chief compliance officer for National Planning. National Planning -- the No. 15 independent broker-dealer on the FP50 -- is part of National Planning Holdings, the nation's sixth largest B-D network and an affiliate of Jackson National Life Insurance Company. Calls to National Planning were directed to Jackson, which declined to comment on the case, according to a spokeswoman.
As of June 15, Eracleous' BrokerCheck report made no mention of his being discharged, though it shows him having left the IBD a month after Wiegand. FINRA's BrokerCheck reports are not
After leaving National Planning, Eracleous went to work at First Allied Securities where his voice mail remained active two weeks ago.
However, the IBD has fired him, First Allied spokesman Joe Kuo says.
"[C]ontrary to our firm's policies," Kuo says, "the advisor in question never notified First Allied of the existence of his regulatory and legal issues. First Allied is committed to working with advisors who adhere to the highest possible standards of conduct in their business, and this advisor has been terminated from our firm."
Eracleous did not return calls to his office.
'THIS ISN'T RAJ RAJARATNAM'
Eracleous, Wiegand and Fefferman have agreed to settlements that are subject to court approval, the SEC says.
Now, both Eracleous and Wiegand have to start their lives over, says Warren, who wishes there was some sort of "middle ground" by which the two didn't have to lose their careers.
"I guess the SEC is doing a great job because they are focusing on a lot of small transactions," Warren says, but "this isn't Raj Rajaratnam," the infamous insider trading kingpin jailed for using insider information to bolster the performance of his hedge fund the Galleon Group.
Wiegand's lawyer McMullen says a new precedent in insider trading cases offered his client a chance to fight the charges against him, but he decided not to use it.
"Mr. Wiegand wanted to plead guilty at the earliest opportunity because he feels tremendous regret for his actions," McMullen says. "He wants to accept responsibility for his actions, notwithstanding any creative defense arguments."
"For Akis it's really sad," Warren says. "He's a third-hand tippee. He really threw away a career for what he did. He gets it now."
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