August 26, 2014 / 4:51 PM / 4 years ago

UPDATE 2-U.S. charges investor relations executive with insider trading

(Adds details of investigation, bail hearing and comment from firm founder)

By Joseph Ax and Nate Raymond

NEW YORK, Aug 26 (Reuters) - U.S. prosecutors on Tuesday charged an executive of a New York investor relations firm with insider trading, accusing him of using nonpublic information to earn more than $538,000 in illicit profits.

Michael Lucarelli, a former director of market intelligence at Lippert/Heilshorn & Associates, was arrested early Tuesday morning at his Manhattan apartment, a spokesman for the FBI said. A criminal complaint made public in federal court charged Lucarelli with 13 counts of securities fraud.

A separate civil lawsuit by the U.S. Securities and Exchange Commission charged Lucarelli with an even broader insider trading scheme in which the regulator said he amassed more than $950,000 in illegal profits.

The case is the latest in a string of insider trading prosecutions under Manhattan U.S. Attorney Preet Bharara, whose office has since October 2009 secured convictions of 81 people.

Bharara said in a statement that despite the “well-known parade” of convictions, Lucarelli “was not deterred and violated both his company’s policies and his responsibility to its clients by trading on material nonpublic information for his personal financial gain.”

The criminal complaint said Lucarelli’s illegal trades began in August 2013 and continued until earlier this month.

Oscar Michelen, Lucarelli’s lawyer, declined to discuss the case in detail and said he wanted to review it with his client.

Lucarelli, 51, appeared in court and was released on $500,000 bail.

Lucarelli is accused of trading in several companies that were clients of his firm, including TREX Co Inc, FAB Universal Corp, PhotoMedex Inc, LCA-Vision Inc, Pacific Ethanol Inc, Dot Hill Systems Corp and Lifetime Brands Inc.

Authorities said Lucarelli opened several brokerage accounts without divulging his employment at Lippert/Heilshorn, where he had access to the companies’ financial announcements before they were publicly released.

Keith Lippert, a founder of Lippert/Heilshorn, in an interview said the FBI first approached him July 22. The firm cooperated in the probe, following authorities’ request to not immediately fire Lucarelli, he said.

“They strongly suggested that we keep business as usual so they could conduct their activities,” he said.

According to the complaint, federal agents obtained a search warrant for Lucarelli’s office and on July 24 found a draft copy of a press release from TREX containing its second quarter results dated Aug. 4, 2014 in his locked briefcase.

The investigators photographed the release and returned it to the briefcase in order to keep Lucarelli unaware of the probe, the complaint said.

During the following week, one of Lucarelli’s brokerage accounts purchased more than 37,000 shares of TREX. Most of the shares were sold on Aug. 4 for a profit of nearly $90,000, the complaint said.

The case is U.S. v. Lucarelli, U.S. District Court, Southern District of New York, No. 14-mj-1878. (Editing by Grant McCool)

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