Former Cazenove banker found guilty of insider dealing

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The Independent Online

A former Cazenove banker will return to Southwark Crown Court in London today to be sentenced, after being convicted yesterday on five counts of insider dealing.

Malcolm Calvert faces up to seven years in prison after a jury returned a guilty verdict following 18 hours of deliberations. Calvert was a partner at the bank and worked as an equity market-maker. He was acquitted on a further seven counts.

The prosecution, which was brought by the Financial Services Authority (FSA), centred on information passed to Bert Hatcher, a friend of Calvert's, who invested £1.3m, returning a profit of £280,000. Two-thirds of the profits were passed to Calvert, the prosecution claimed. The guilty verdicts relate to Mr Hatcher's investment in three companies. On each occasion, the shares were bought just before price-moving information came into the public domain. Calvert's share of the proceeds was stuffed in envelopes and left with a racetrack bookmaker.

Calvert did not give evidence during his three-week hearing. Mr Hatcher, who suffers from dementia, provided written evidence two years ago. It can now be revealed that Mr Hatcher has agreed to pay a £56,000 fine and accept a ruling of market abuse in return for immunity from prosecution.

The conviction is a victory for the FSA, which has been under pressure to bring prosecutions.

"The FSA was given powers in this area in 2001, but only brought its first prosecution at the start of 2008," said Dan Hyde, a white-collar crime specialist at the City solicitors Cubism Law. "Cases such as this one indicate that the FSA is getting tougher in relation to insider dealing, and in many ways the standard in the UK is now harsher than in the US, where the SEC [Securities and Exchange Commission] has a reputation of cracking down hard."

The case centred on allegations of insider dealing between 2003 and 2005. Calvert left the bank, which is now owned by the giant US investment bank JP Morgan, in 2000. However, the prosecution established that the source of the allegations must have been an employee of Cazenove's.

In a statement yesterday, the bank distanced itself from the trial, adding that it had carried out an investigation into the source of the leaks, but it had been unable to identify who had passed the information to Calvert.

"This case was against an individual who left Cazenove in 2000 and was in connection with matters between 2003 and 2005," it said. "There were never any charges brought against Cazenove and no breach of systems and controls was identified. We co-operated fully with the FSA throughout their investigation and will continue to support them in their efforts to ensure that the UK's financial markets are free from abuse."

The bank refused to comment further and declined to give details of the sort of investigation that was carried out. Mr Hyde said: "Without pinning down where Calvert got his information from, it is almost impossible to conduct a meaningful investigation into the bank's behaviour."