Bryan Shaw sentencing watch. – Update on chronology.

UPDATE sentencing coverage in this post.

The federal PACER system does not show any updates as of the evening of 6/1 that would change the scheduled sentencing of Bryan Shaw on 6/2 for conspiracy for his insider trading based on information provided by former KPMG partner Scott London. Scheduled for 8:00 a.m. on June 2.

The defense has filed a supplemental sentencing document that spells out in more detail the cooperation provided by Mr. Shaw. I read through it and glanced at the initial complaint against Mr. London. Here are a few highlights:

February 8, 2013 – Mr. Shaw rolled over on Mr. London and rolled hard.

He met with the US attorney, two SEC attorneys, and FBI agent before DOJ, FBI, and SEC knew the scheme existed. From the filing:

Mr. Shaw meets at the U.S. Attorney’s Office with Assistant U.S Attorney James Bowman, an FBI Special Agent, and two SEC attorneys. He provides a full confession of his conduct and detailed information about London’s involvement and about the specific companies and trades affected by insider information. (Complaint ¶ 22). Prior to Mr. Shaw providing this information, the DOJ and FBI had no knowledge that the insider trading scheme existed, and the SEC had only issued an initial subpoena to Mr. Shaw in connection with its administrative examination.

Mr. Shaw initiated two in-person meetings and multiple phone calls to Mr. London. During those discussions Mr. London volunteered inside information on the following dates:

  • February 14
  • February 19
  • February 20 – contains an odd comment which I’m quoting: “London again references rumors about Herbalife going private, stating that “we’re gonna make money” when that happens. London laughs when Mr. Shaw responds, “I know that – why do you think I’m paying you?” (Complaint ¶ 27).”
  • February 21
  • February 21 – in person meeting with transfer of $5K; additional inside information passed
  • February 26
  • February 27
  • February 28
  • March 4
  • March 7 – in person meeting with transfer of $5K; photo from the surveillance hit all the papers; additional inside information passed

Now let’s go back to the criminal complaint dated April 11, 2013.

  • March 20 – FBI confronts Mr. London at his residence in the morning.
  • April 3 – interview with Mr. London at the U.S. Attorney’s office with two FBI agents, federal prosecutor, and two SEC attorneys, with interview initially given under limited use immunity.
  • April 9 – I think this when the news broke.

Some stray thoughts:

The scheme appears to have been dormant until 2/14/13, although I need to backtrack the activity some more to be sure. Not sure when it went dormant.

The amount of cash is generally referred to as $60,000 or more. Of this, $10,000 was provided at the direction of the FBI. Add in $12K for a watch gives around $72K, less $10k provided by the FBI means $62k was volunteered by Mr. Shaw. Setting aside the concert tickets and dinners, that is the amount Mr. Shaw volunteered as Mr. London’ share.

I recall a comment that I won’t look up at the moment that Mr. London indicated (I think it was him saying that was the understanding but need to double-check that) that the proceeds would be split in thirds: one share to Mr. Shaw, one to Mr. London, and one for taxes.

If you go with the trading proceeds in the various federal filings of about $1.27M, then the one-third split would have been $423K. If you go with the $1,600K amount the federal sentencing recommendation says the SEC says they subsequently calculated, then the one-third split would be $533K.

That means Mr. Shaw shorted Mr. London either $361K or $471K.

If you are really so interested that you read to the end of this post, then you will really, really want to watch the news wires tomorrow. (Did I just say wires? Um. Yeah. Make that watch your twitter feed.)

UPDATE sentencing coverage in this post.

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