* Thomas Conradt, David Weishaus charged with fraud
* Trades said to be made before IBM bought SPSS in 2009
By Jonathan Stempel
NEW YORK, Nov 29 (Reuters) - Two former stock brokers at a Connecticut financial services company were charged with criminal insider trading on Thursday over a 2009 acquisition by computer giant IBM Corp.
U.S. authorities said Thomas Conradt, David Weishaus and three unnamed colleagues made more than $1 million in illicit gains by trading in shares of SPSS Inc before IBM agreed on July 28, 2009, to buy the Chicago-based software company for $1.2 billion.
The criminal indictment details a trail of instant messages involving the men about their activity, some of which refer to other insider-trading cases involving homemaking doyenne Martha Stewart and the billionaire Mark Cuban.
Prosecutors said the scheme got its start with a tip from an associate at the New York law firm that represented IBM in the transaction. Prosecutors did not name the law firm, but Cravath Swaine & Moore has said it was IBM's representative.
"Thomas Conradt, David Weishaus and their co-conspirators engaged in a chain of illegal tipping simply because they wanted to get rich quick," federal prosecutor Preet Bharara said in a statement.
Conradt, 34, is a lawyer living in Denver, while Weishaus, 32, lives in Baltimore. At the time of the alleged insider trading, both were employed at Euro Pacific Capital Inc, a Westport, Connecticut-based firm, according to the Financial Industry Regulatory Authority.
Conradt and Weishaus were arrested by the Federal Bureau of Investigation Thursday morning, an FBI spokesman said.
They were each charged with three criminal counts of securities fraud and one criminal count of conspiracy in an indictment unsealed in U.S. District Court in Manhattan.
They face up to 20 years in prison and a $5 million fine on each of the securities fraud counts. Both are expected to make initial appearances in federal courts near where they live.
The U.S. Securities and Exchange Commission filed related civil fraud charges against both men.
Sharon Feldman, a lawyer for Conradt, did not immediately respond to a request for comment. Michael Grudberg, a lawyer for Weishaus, declined to comment.
Euro Pacific Capital and Cravath did not immediately respond to requests for comment. Armonk, New York-based IBM did not immediately respond to a similar request.
IBM agreed to pay $50 per share for SPSS, a 42 percent premium to SPSS' closing price on the day before the purchase was announced.
According to court papers, Conradt's roommate, an Australian equities analyst, had learned about the pending acquisition from a close friend, a New Zealand citizen who worked as an associate at the New York law firm.
Investigators said Conradt then tipped Weishaus, who in turn tipped three colleagues, who were not named in court papers. These five people placed the various improper trades in SPSS stock and options, according to the court papers.
The indictment outlines a series of instant messages involving the defendants that prosecutors said reflect their involvement in the improper trades.
In one exchange, according to the indictment, Conradt on July 1, 2009, told Weishaus, "jesus, don't tell anyone else ... we gotta keep this in the family."
Weishaus then said, "i dont want to go to jail," said "martha stewart spent 5 months in the slammer," and alluded to an SEC insider-trading case against Cuban, the owner of the Dallas Mavericks pro basketball team.
On July 23, Weishaus refused to buy SPSS call options for Conradt, prompting Conradt to write, "i'm setting this deal up for everyone ... makin everyone rich," according to the indictment.
The criminal case is U.S. v. Conradt et al, U.S. District Court, Southern District of New York, No. 12-cr-00887. The SEC case is SEC v. Conradt et al in the same court, No. 12-08676.