NEW YORK Feb 6 U.S. prosecutors said they are nearing deals to resolve cases against former brokers and traders whose convictions for misusing information broadcast over internal "squawk box" systems were overturned last year.
The U.S. attorney's office in Brooklyn said in a letter filed Monday that it expects to reach resolutions with four of six defendants by the end of the week, which would likely result in the end of the criminal cases against them.
The letter did not name the defendants.
The tentative deals are expected to involve deferred prosecution agreements, according to a source familiar with the matter. Such agreements, which are frequently used to resolve cases against companies, allow defendants to avoid criminal charges if they stay out of trouble and meet other conditions.
The defendants were charged in 2005 with scheming with traders at the now defunct broker-dealer A.B. Watley Inc to generate millions of dollars in illegal profits. Prosecutors said between 2002 and 2004, the traders were allowed to listen to pending orders by institutional customers over brokerage firms' internal speaker systems, known as "squawk boxes."
Six defendants were each convicted in 2009 of one count of conspiracy to commit securities fraud.
Last August, the 2nd U.S. Circuit Court of Appeals threw out the convictions, saying prosecutors had withheld evidence and that jurors had been inadequately instructed.
It sent the case back to federal court in Brooklyn, rejecting the defendants' argument that a new trial was unconstitutional.
The six defendants are Kenneth Mahaffy, formerly of Merrill Lynch & Co Inc., now part of Bank of America Corp, and Citigroup Inc ; David Ghysels, formerly of Lehman Brothers Holdings Inc; Timothy O'Connell, formerly of Merrill; and Keevin Leonard, Robert Malin and Linus Nwaigwe, all formerly of Watley.
Lawyers for Mahaffy, O'Connell and Ghysels declined to comment Wednesday on the letter. An attorney for Malin said he was looking forward to reaching a resolution.
Lawyers for the other defendants could not immediately be reached for comment.
In Monday's letter, prosecutors said they have reached an agreement in principal with a fifth defendant, which would also resolve a related civil case by the U.S. Securities and Exchange Commission. The government intends to renew talks with the sixth to resolve his case "in the near future," according to the letter.
The U.S. attorney's office in Brooklyn and the SEC also declined comment.
The case is U.S. v. Mahaffy, U.S. District Court for the Eastern District of New York, No. 05-613.