Disney secretary charged with insider trading

The FBI alleges that the woman and her boyfriend tried to sell advance copies of Disney's May earnings.

By Charley Blaine May 26, 2010 1:49PM
Updated: 2:10 p.m. ET

The executive assistant to Walt Disney's (DIS) head of corporate communications and her boyfriend were arrested in Los Angeles today on charges of insider trading tied to the entertainment giant.

Bonnie Hoxie and Yonni Sebbag are accused of trying to sell confidential information about Disney's quarterly earnings to a number of hedge funds. The Los Angeles Times said  Hoxie had worked for Zenia Mucha, Disney's head of corporate communications.
The information the pair allegedly tried to peddle also included purported tips on alleged efforts to sell the ABC television network to private equity firms. Before today, Disney's only discussion about ABC's future was a comment by CEO Bob Iger that he was taking a "hard look" at the network.

In a Disney statement this afternoon on the case, the company said, "The reference in the complaint to conversations regarding the ABC network were and are false."

Disney shares were up 3.5% to $33.45 today, the leading performer among the 30 Dow Jones industrials ($INDU).

Hoxie, 33, and Sebbag, 29, are each charged with one count of wire fraud and one count of conspiracy. Each faces a maximum sentence of 25 years in prison and a fine of at least $250,000.

A Securities and Exchange Commission complaint, filed in U.S. District Court in New York today, alleges that, in March, Sebbag sent anonymous letters to at least 33 investment companies, including "at least 20 hedge funds" in the United States and Europe, offering to sell "for a fee" copies of Disney's fiscal-second-quarter results before their May release. Walt Disney

Several of the hedge funds immediately contacted the SEC. The SEC and the FBI then set up up a sting operation.

The letter and subsequent e-mails and phone conversations between Sebbag and FBI agents posing as traders with hedge funds that trade millions of shares said the couple expected the buyers of the information to trade on it.

The FBI set up an undercover operation to contact the writer. Posing as employees of different hedge funds, they contacted Sebbag, who was using an alias. After a number of e-mail exchanges and phone calls, one FBI agent agreed to pay Sebbag $15,000. Another deal called for a 50-50 split of trading profits.

The idea was to deliver the results three or four days before their release so that the hedge funds could trade in Disney shares.

But the document that Sebbag obtained had only brackets where actual results would be found. The brackets would be filled in later. But it also contained detailed information about the performance of Disney's various business groups.

Sebbag later told his contacts, the complaint says, that he would have the results two to three hours before the release. But Hoxie couldn't deliver those either. But she allegedly was able to provide Sebbag with the earnings per share -- 48 cents.

Later, she allegedly put in her claim for the profits Sebbag expected to earn, pointing to a $700 Stella McCartney handbag on sale at Neiman Marcus.

The FBI agents paid Sebbag $15,000 in cash at a May 14 meeting in New York. Sebbag identified himself, said his girlfriend was a Disney employee working with him on the deal and added that he could provide more information, the complaint says. He also asked for advice on getting the money deposited offshore.

They also agreed to a future meeting with the undercover agents to discuss building their relationship. But they were arrested instead, the complaint says.

Would the scam have benefited the purported traders? Maybe. Disney closed at $35.76 on May 11 and climbed to $36.21 after the open, then fell back to $35.13.
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