* 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 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
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
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.
KEEPING IT IN THE FAMILY
IBM agreed to pay $50 per share for SPSS, a 42 percent
premium to SPSS' closing price on the day before the purchase
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
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.