SAN FRANCISCO (Reuters) - A former Deloitte Tax LLP partner and his wife were charged with leaking confidential information about upcoming mergers to family members in a trading scheme that securities regulators said reaped $23 million in illicit profits.
U.S. regulators accused Arnold McClellan and his wife, Annabel, of providing advance notice of at least seven deals planned by Deloitte’s clients that had not yet been made public. The civil complaint was filed on Tuesday by the U.S. Securities and Exchange Commission in U.S. district court for the northern district of California.
The couple is accused of tipping two relatives in the UK, who were charged along with three others last week by the UK’s Financial Services Authority.
The SEC accused Arnold McClellan, a 51-year-old San Francisco resident, of passing information from 2006 to 2008 about Deloitte clients to his wife.
Annabel McClellan, 38, then told her sister, Miranda Sanders, in Great Britain, the SEC contends.
Miranda Sanders’ husband, James Sanders, was an owner of the now defunct London brokerage Blue Index Ltd.
The SEC contends that James Sanders in turn tipped Blue Index clients and other individuals, who made approximately $20 million by trading on the inside information.
Attorneys for Arnold McClellan said their client was “a conscientious, law-abiding professional with a 23-year unblemished track record of client service at Deloitte” and would fight the charges.
“He did not trade on insider information, and there will be no evidence that he passed along any confidential information to anyone,” said his lawyers, Elliot Peters and Christopher Kearney of the law firm Keker & Van Nest LLP.
An attorney for Annabel McClellan was not immediately available for comment. Attorneys for the Sanders, when contacted last week after the UK charges were announced, said the couple was innocent.
The McClellans reaped illegal profits of approximately $3 million from the alleged illegal trading, according to the SEC, which is seeking disgorgement of trading profits and financial penalties.
The SEC said that some of the illegal trades were made in securities of Kronos Inc, a software company taken private in 2007 by private equity firm Hellman & Friedman LLC.
In an earlier insider trading probe, Kronos was among the companies that the SEC had alleged three former traders at New York-based Schottenfeld Group LLC had also traded in on the basis of inside information.
Two of those traders pleaded guilty and agreed to cooperate with prosecutors. Schottenfeld settled with the SEC without admitting wrongdoing.
McClellan also allegedly revealed Microsoft Corp’s 2007 acquisition of aQuantive Inc, and Getty Images Inc going private in 2008, according to the SEC complaint.
Deloitte spokesman Jonathan Gandal said the company is “shocked and saddened” by the allegations. Deloitte cooperated with the SEC, which has not alleged any wrongdoing against the firm, he said.
“If the allegations prove to be true, they would represent serious violations of our strict and regularly communicated confidentiality policies,” Gandal said.
Deloitte won a lawsuit late last year against a former top executive whom it accused of trading shares of several of the firm’s clients. The former executive, Thomas Flanagan, and his son agreed to pay more than $1.1 million to settle SEC charges. They did not admit or deny the allegations.
Reporting by Dan Levine, Jonathan Stempel and Rachelle Younglai; Editing by Dave Zimmerman and Steve Orlofsky