On May 5, the presiding judge postponed sentencing from May 19 to June 2 for Bryan Shaw, who pled guilty to insider trading. He based his trades on information provided by Scott London, formerly regional audit PIC for KPMG.
The U.S. Attorney is requesting 6 months in jail, 3 years supervised released, and a $3,000 fine.
Sentencing level under federal guidelines would be 37 to 46 months. Because of the extensive assistance in building the case against Mr. London, the U.S. Attorney calculates the guidelines would indicate a sentence of 12 to 18 months. Because of aggravating and mitigating factors, the prosecutors recommend a below-guideline sentence of 6 months.
In addition, the government requests three years of supervised release. Prosecutor also request a fine of $3,000, acknowledging Mr. Shaw has already paid about $1.9 million to the SEC as a fine ($658,000) and disgorgement of profits ($1,271,787). Sentencing guidelines suggest a fine in the range of $3k to $30k, so the recommended fine is at the bottom of the range.
The report indicates the initial analysis of insider trading gains were $1,270,000 which was increased by subsequent SEC analysis to about $1,600,000 of gain.
The defense sentencing recommendation is probation, with home confinement if the judge considers it necessary.
This position is based on many cited factors, but particularly the extensive cooperation provided by Mr. Shaw. The filing says that Mr. Shaw went to the FBI and U.S. Attorney before they knew of the SEC’s interest in Mr. Shaw and before the FBI or US Attorney had any idea there was an insider case or any involvement from Mr. London. This cooperation allowed the government to build a case in three months in contrast to the typical year needed to build an insider trading case.
In addition, Mr. Shaw’s attorney points out that the information and cooperation provided made such a strong case that it was likely Mr. London would immediately confess.
The filing also points out the huge deterrent effect of the massive publicity of getting that now famous photo of handing over the $5,000 cash. If you recall, that pic was in most newspapers across the country, including first page, above-the-fold position in the Wall Street Journal.
Stay tuned. Sentencing on June 2.