Investor Relations Director Accused of Using Client Information for Insider Trades

Source: By SYDNEY EMBER, New York Times • Posted: Wednesday, August 27, 2014

For at least a year, Michael A. Lucarelli, an employee at an investor relations agency in New York, reaped huge rewards in the stock market. Now, his gains have become a publicity nightmare.

Mr. Lucarelli, the director of market intelligence at Lippert/Heilshorn and Associates, was arrested and charged with 13 counts of insider trading for buying and selling stocks based on information in news releases his company had prepared for its clients, the F.B.I. and Preet Bharara, the United States attorney in Manhattan, said in a statement.

“Instead of doing his job, Lucarelli spent his days setting up brokerage accounts to make illegal trades using inside information from unwitting clients,” George Venizelos, the F.B.I. assistant director in charge of the New York field office, said in a statement. The suspected insider trades yielded Mr. Lucarelli at least $538,215 in profits, the government contends.

If convicted, Mr. Lucarelli faces up to 20 years in prison for each of the 13 counts and a fine of up to $5 million per count.

The Securities and Exchange Commission is also investigating Mr. Lucarelli.

Prosecutors contend that, beginning in August 2013, Mr. Lucarelli bought and sold stocks based on nonpublic information mentioned in news release drafts his firm had written. He did not write news releases, but the firm did keep such releases and other documents on a server in New York, according to the complaint.

Soon after the news was made public, he would trade out of his position, sometimes making over $50,000 on the stock’s price movement. In one instance, he made $85,509.85 on trades of Pacific Ethanol, a company that markets and produces renewable fuels. Other companies whose shares he bought and sold included a skin care manufacturer and a company that designs and sells kitchenware. The news releases generally pertained to clients’ quarterly earnings.

Keith L. Lippert, a founding partner at Lippert/Heilshorn and Associates, said the firm was made aware of the investigation into Mr. Lucarelli’s trading activity on July 22 and has “cooperated fully with the authorities in terms of providing them with the information they requested.” The firm continued to keep Mr. Lucarelli as an employee until his arrest so as not to tip him off that he was in the government’s cross hairs, he said.

“We’ve always prided ourselves on the honesty and integrity of our employees and clients in dealing with nonpublic information,” Mr. Lippert said. “This is very disconcerting and very sad that something like this would happen.”