By Jessica Dye
NEW YORK, March 28 U.S. prosecutors said on
Thursday they reached deals to resolve cases against former
brokers and traders whose convictions for misusing information
broadcast over internal "squawk box" systems to generate illegal
profits were overturned last year.
During a hearing in U.S. District Court in Brooklyn,
assistant U.S. attorney James McMahon said all six defendants
had entered into deferred prosecution agreements with the
government to end the long-running criminal cases.
The agreements call for the criminal cases to be dropped if
after a certain period of time the defendants stay out of legal
trouble and meet other conditions. The durations of those
agreements vary among defendants from six months to five years,
The agreement bans the men from committing state or federal
felonies during the duration of the deal and from violating
certain securities regulations, he said.
Additional details of the agreements were not publicly
available. The U.S. attorney's office declined further comment.
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."
The 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
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.
If the defendants meet the terms of the deferred prosecution
agreements, the charges will be dismissed with prejudice,
meaning they cannot be refiled.
Andrew Firsch, an attorney for Mahaffy, said Thursday that
while his client was relieved to put the case behind him, "he
can't get the 7-1/2 years back" he spent fighting the charges.
Mildred Whalen, a lawyer for O'Connell, said her client was
"glad this ordeal will be over soon. Roland Riopelle, a lawyer
for Malin, said he was "relieved and gratified" by the
arrangement. Lawyers for the other defendants did not
immediately return requests for comment Thursday.
Four of the defendants, excluding Nwaigwe and Leonard, have
reached agreements to settle related civil cases brought by the
U.S. Securities and Exchange Commission, McMahon said during the
hearing. The SEC did not immediately return a request for