A Watertown, Massachusetts, man has been convicted of securities fraud after a federal jury in Boston found him guilty of profiting from an insider trading tip he received on a cocktail napkin at a golf club. He was acquitted of a separate charge of conspiracy to commit securities fraud.
Real estate developer Robert H. Bray, 78, obtained information from Patrick O’Neill, a former executive with Eastern Bank Corp., that Eastern was going to purchase Wainwright Bank & Trust Co. in 2010. According to court documents, O’Neill allegedly wrote the word “Wainwright” on a cocktail napkin at the Oakley Country Club in Watertown and gave it to Bray.
Bray allegedly used this information to purchase Wainwright shares at a discount two weeks before the acquisition was announced. Eastern eventually paid twice the initial share price for its purchase of Wainwright, netting Bray $300,000 in profit.
At trial, Bray argued that prosecutors had failed to show that O’Neill had received a personal benefit from the tip as required under the Second Circuit’s landmark Newman ruling. Under Newman, prosecutors must show that the source of confidential information received a personal benefit from sharing that information, and that both parties knew of such benefits.
According to the indictment, O’Neill received a benefit when Bray allegedly gave him an opportunity to invest in one of his real estate projects following the Wainwright deal.
“Today’s conviction underscores our commitment to making sure that there is a level playing field for all securities investors – and that those who would pass on confidential corporate information on napkins at bars, in whispered conversations on golf courses or in any other way, are held accountable for their actions,” U.S. Attorney Carmen Ortiz said in a statement.
O’Neill has pleaded guilty to conspiracy to commit securities fraud and is awaiting sentencing. Bray faces a maximum sentence of 20 years in prison as well as a fine of up to $5 million.
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