NEW YORK (Reuters) - A group of seven former brokers and day-trading executives will face a second trial over whether they conspired to improperly profit from information broadcast over brokers’ internal “squawk box” systems.
“Squawk boxes” are devises that sit on a brokerage firm’s trading desk and broadcast institutional orders to buy and sell large blocks of securities.
Prosecutors accused former stock brokers at Merrill Lynch and Co. Inc., Citigroup and Lehman Brothers Holdings Inc. of scheming to allow day traders at the now-defunct broker-dealer A.B. Watley Inc. to listen to their firms’ squawk boxes through open telephone lines.
After an eight-week trial a jury acquitted the defendants of fraud charges, and found one of the ex-brokers, Timothy O’Connell, guilty of witness tampering and making false statements.
But the jury of six men and six women said it was impossible to reach a consensus on the conspiracy charge in the case. Judge I. Leo Glasser, who oversaw the case at U.S. District court in Brooklyn, declared a mistrial on the conspiracy charge.
In court documents filed this week, prosecutors said they will seek to retry the conspiracy charge.
Glasser, however, said he would recuse himself from the trial and the case was reassigned to Judge Allyne Ross.
Defense attorneys indicated in letters on Thursday that they will seek to prevent the government from retrying the case on double jeopardy grounds.
The former brokers facing charges are Kenneth Mahaffy, who worked at Merrill and Citigroup’s Smith Barney unit; Timothy O’Connell, who worked with Mahaffy at a Merrill Lynch branch in New York; and David Ghysels, who worked at a Lehman Brothers office in Florida.
Former A.B. Watley President Robert Malin, the firm’s compliance director Linus Nwaigwe, Watley’s former chief operating officer, Michael Picone, and Keevin Leonard, who supervised Watley’s traders, are also facing the charge.
Each defendant faces a maximum of 25 years in jail and fines of $250,000 on the conspiracy charge.
The defendants also face a civil lawsuit brought by the U.S. Securities and Exchange Commission.