fraud crime money laundering

A federal indictment unsealed earlier this month in a U.S. District Court charged nine defendants with insider trading and money laundering surrounding the leaking of confidential information about upcoming corporate mergers and acquisitions, including the merger of shipping companies K-Sea and Kirby Corp.

The indictment alleges that the criminal conspiracy, led by John Femenia, a 2003 graduate of the US Merchant Marine Academy, netted over $11 million in illegal proceeds as a result of the insider trading activities.

The indictment charges Femenia, 31; Shawn C. Hegedus, 32; and Danielle C. Laurenti, 31, all of New York, with conspiracy to commit insider trading, conspiracy to commit wire fraud, securities fraud, and money laundering. Femenia and Hegedus are also charged with bank fraud. Femenia was arrested on 13 December in New York, while Hegedus and Laurenti are currently listed as fugitives.

The remaining six defendants named in the indictment include Femenia’s former Merchant Marine Academy roommate Aaron Wens, as well as Matthew J. Musante, of Miami; Roger A. Williams, of Georgetown, South Carolina; Kenneth M. Raby, of Greer, South Carolina; Frank M. Burgess, Jr., of Charlotte, North Carolina; and James A. Hayes, also of Charlotte. The defendants have agreed to plead guilty to conspiracy to commit insider trading.

According to allegations contained in the indictment, Femenia, an investment banker who lived in Charlotte and New York, stole material, including non-public information from his employer, Wells Fargo, and its clients about potential and upcoming mergers and acquisitions. The indictment alleges that Femenia provided the inside information to co-conspirators who traded on the information. These co-conspirators then passed the confidential inside information to other co-conspirators who also traded on that information, the indictment alleges.

The indictment further alleges that Femenia was paid kickbacks for the stolen information in several forms. For example, according to the indictment, Hegedus, who was a stockbroker and Femenia’s high school friend, bought 550 gold bars with proceeds of the insider trading. Femenia then sold four of the gold bars for $70,877 to a precious metals dealer in Oklahoma. According to allegations contained in the indictment, Femenia also received kickbacks in cash, including by co-conspirators making cash deposits by ATM into an account in the name of Femenia’s girlfriend. The indictment also alleges that co-conspirators Hegedus and Laurenti laundered proceeds of the insider trading through a casino in Las Vegas. The indictment further alleges that Femenia and Hegedus engaged in mortgage fraud through the fraudulent purchase of a luxury home in Waxhaw, North Carolina.

The conspiracy to commit insider trading charge carries a maximum term of five years in prison and a $250,000 fine. The conspiracy to commit wire fraud charge carries a maximum term of 20 years in prison and a $250,000 fine. The securities fraud charge carries a maximum term of 20 years in prison and a $250,000 fine. The bank fraud charge carries a maximum term of 30 years in prison and a $1,000,000 fine. The money laundering conspiracy charge carries a maximum term of 20 years in prison and a $250,000 fine, or a fine of twice the amount of criminally derived proceeds.

An indictment is merely an allegation, and the defendants are presumed innocent unless and until proven guilty beyond reasonable doubt in a court of law. In addition, the agreement to plead guilty by any other person is not relevant to the guilt of any indicted person.

In announcing the insider trading indictment, U.S. Attorney Tompkins praised the investigative work of the FBI in Charlotte and thanked the U.S. Securities and Exchange Commission, the Financial Industry Regulatory Authority, and Wells Fargo for their assistance.

Image (c) Shutterstock/alexskopje

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