"Squawk box" case ends with acquittals, mistrial

By Emily Chasan and Edith Honan

NEW YORK (Reuters) - A U.S. jury acquitted three ex-brokers and four former day trading executives of fraud charges in a trial over whether they profited illegally through improper use of information broadcast over the brokerages' internal "squawk box" systems.

After five days of deliberations and a seven-week trial, a jury panel of six men and six women returned a partial verdict, saying it was impossible to reach a consensus on the conspiracy charge in the case.

Only one of the ex-brokers, Timothy O'Connell, was found guilty of witness tampering and making false statements, in connection with telling his assistant to lie to government investigators.

The remaining six defendants were found not guilty on all the charges in which the jury reached a consensus.

Judge I. Leo Glasser, who oversaw the case at U.S. district court in Brooklyn, declared a mistrial on the conspiracy charge after jurors told him they were "deadlocked, beyond redemption."

Prosecutors had accused former stock brokers at Merrill Lynch and Co. Inc. MER.N, Citigroup (C.N) and Lehman Brothers Holdings Inc. LEH.N of taking bribes in exchange for allowing day traders at the now-defunct broker-dealer A.B. Watley Inc. to listen to their firms' squawk boxes through open telephone lines.

They accused the Watley day traders of generating at least $650,000 from 2002 to 2004 in illegal trading profits by buying or selling ahead of the large orders they heard about on the boxes -- an illegal practice known as "front-running."

But during the trial, defense attorneys argued that the defendants were tricked into participating in the scheme by Watley's one-time chief executive, John Amore, and that the brokers had little or no training in how to use the squawk boxes.

Jurors said that was one of the issues that stumped them.

"I think it happened the way they (the prosecutors) said, but did they prove to me it happened? No," the jury foreman James Hiatt, 24, told reporters after the verdict.

"I didn't see intent," Hiatt continued. "That's a leap of faith I couldn't make."

Jurors said that they didn't believe the conspiring government witnesses, particularly Amore, and that they were frustrated the government had no direct record of what had played over the squawk boxes.

"There wasn't enough proof," said juror Jaime Bonura, 41, who is a teacher.

Prosecutors would not comment. The case, however, is credited with changing the way information about large institutional trades flows on Wall Street, legal experts have said. Since the case was brought the use of squawk boxes has been severely more limited at the large firms.

"The government pressed the envelope and they did the best they could and the jury did the right thing," said Roland Riopelle, a lawyer representing former A.B. Watley President Robert Malin.