New York (HedgeCo.Net) – Eric M. Martin, Mark Megalli, and Richard T. Posey have been sentenced to federal prison for their roles in a multi-million-dollar insider trading conspiracy involving childrens clothing company Carter’s, Inc. stock.
Mark Megalli worked at New York hedge fund Level Global Investors was the contact point for some of the insider trading, the FBI says. Megalli in turn caused Level Global to execute multimillion dollar trades in Carter’s stocks based on the inside information received from Martin from September 2009 through July 2010. The former-Carter’s executives also tipped off others including NJ hedge fund Titan Capital Management LLC.
Eric Martin was Carter’s Director and later Vice President of Investor Relations, his actions, the FBI said, including illegal trading and tipping of others between 2005 and 2010 resulted in over $7 million in insider trading gains and losses avoided for Martin and his downstream tippees. Posey’s illegal trading and tipping of Martin between 2009 and 2010 resulted in over $5 million in insider trading gains and losses avoided. Megalli’s illegal trading between 2009 and 2010 resulted in over $3 million in insider trading gains and losses avoided for Level Global.
The FBI said: “On a consistent basis between early 2005 and his separation from Carter’s in March 2009, Martin disclosed material, non-public information about Carter’s upcoming earnings releases and other developments to a former Wall Street analyst identified by the government as “Cooperator Number 1,” for the purpose of making illegal insider trades. Cooperator Number 1 repeatedly bought and sold Carter’s stock on the basis of this information, earning substantial illegal profits and illegally avoiding substantial losses. Cooperator Number 1 also tipped others, including Titan Capital Management LLC, a New Jersey hedge fund that had retained him as an outside consultant. Martin disclosed this and other material, non-public information in exchange for friendship, reciprocal stock tips about other public companies to which Cooperator Number 1 had access, and future business and networking opportunities.”
After Martin separated from Carter’s in March 2009, Martin continued to obtain inside information in advance of Carter’s earnings releases and other events from Posey, who was his friend and former Carter’s co-worker. Posey was employed as a Vice President of Operations for various Carter’s brands and divisions and later as Vice President of Operations for the company’s wholesale sales business from in or about July 2002 until his termination in January 2013. Posey disclosed the information to Martin from early 2009 through July 2010 in exchange for friendship, reciprocal stock tips, and future business and networking opportunities.
- Martin, 44, of Roswell, GA, was sentenced to two years in prison to be followed by three years of supervised release, ordered to pay restitution in the amount of $950,000, and ordered to perform 80 hours of community service.
- Posey, 53, of Duluth, GA, was sentenced to one year, three months in prison to be followed by three years of supervised release, ordered to pay restitution in the amount of $750,000, and ordered to perform 80 hours of community service.
- Megalli, 42, of New York, NY, was sentenced to one year and one day in prison to be followed by three years of supervised release, ordered to pay restitution in the amount of $50,000, and ordered to perform 100 hours of community service.
A fourth defendant, Steven E. Slawson, 67, of Lebanon, New Jersey, was indicted by the grand jury on May 20, 2014. Slawson, a co-founder of Titan Capital Management, is alleged to have traded on tips obtained from Cooperator Number 1 and later directly from Martin from early 2005 through July 2010.
Alex Akesson
For HedgeCo.net
alex@hedgeco.net
HedgeCo.Net is a premier hedge fund database and community for qualified and accredited investors only. Membership in HedgeCo.net is FREE and EASY. We also offer FREE LISTINGS for Hedge Funds!
