| NEW YORK
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
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
The U.S. attorney's office in Brooklyn and the SEC also
The case is U.S. v. Mahaffy, U.S. District Court for the
Eastern District of New York, No. 05-613.