NEW YORK: IR firm Lippert/Heilshorn & Associates has fired its director of market intelligence Michael Lucarelli after he was arrested on 13 counts of securities fraud tied to alleged insider trading.
Lucarelli’s arrest occurred on Tuesday, after the FBI claimed he accessed the firm’s working drafts of client news releases prior to public issuance, then allegedly bought specific client stocks shortly before the releases were made public. He then allegedly exited those positions after the news was released, profiting on the stock price movement, according to a statement released by the US Attorney’s office for the Southern District of New York.
In total, the investigators allege Lucarelli earned more than $500,000 from illegal trading, the statement said.
Lucarelli was also sued Tuesday by the US Securities and Exchange Commission, which claimed that he made more than $950,000 in roughly one year through illegal profits in a related case.
Further, the FBI has discovered numerous additional trades beyond Tuesday’s charges, the US Attorney’s office said in a statement, adding that the FBI’s investigation is ongoing.
Lippert/Heilshorn founding partner Keith Lippert told PRWeek that the firm was made aware of the investigation on July 22 and fully cooperated with authorities, providing them with all the information they requested.
He noted it was "strongly suggested" that the firm keep Lucarelli onboard, so as not to hinder the investigation. Once he was arrested, however, the firm terminated his contract, effective immediately, Lippert added.
Lippert/Heilshorn has numerous insider trading policies in place and employees sign a document that states they will not buy, sell, or own stock in any of the companies the firm represents, Lippert explained.
"We are a 30-year-old IR agency that has always prided itself on the honesty and integrity of its employees and clients in dealing with non-public information," he said. "When someone violates the policies you put in place to try and run an honest business, it is very disconcerting and very sad."
All Lippert/Heilshorn staffers have been made aware of Lucarelli’s arrest, and Lippert and John Heilshorn, cofounding partner at the firm, have been directly calling clients to bring the news to their attention.
In a statement, FBI assistant director-in-charge George Venizelos said, "Instead of doing his job, Lucarelli spent his days setting up brokerage accounts to make illegal trades using inside information from unwitting clients. He violated the responsibility he had to both company and clients."
Lucarelli’s arrest is part of the efforts underway by President Barack Obama’s Financial Fraud Enforcement Task Force, created in 2009 to "wage an aggressive, coordinated, and proactive effort to investigate and prosecute financial crimes," the US Attorney’s office said in a statement.
In March, New York State Attorney General Eric Schneiderman said he would probe high-frequency traders’ access to market-moving information, or "Insider Trading 2.0," as he called it. He has since reportedly sent at least six high-frequency trading firms subpoenas, seeking information on their relationships with exchanges.
As part of that deal, news-release-distribution service PR Newswire started requiring recipients in April to certify they will not use the information contained within statements for high-frequency trading. Marketwired and Berkshire Hathaway’s Business Wire also agreed earlier this year to stop providing direct feeds to high-frequency traders.
In January, Schneiderman pressured asset manager BlackRock to end its analyst-survey program worldwide. He also encouraged Thomson Reuters to suspend investors’ two-second-early peeks at an economic survey last July.