Translate

Search This Blog

Search Tool




Asian Markets at Close Report

European Markets at Close Report

Jun 28, 2016

Bloomberg Business Week - June 28, 2016: The Story of Britain's Biggest Insider-Trading Trial.

bloomberg.com

By Suzi Ring and Liam Vaughan | June 28, 2016


Operation Tabernula was eight years, and $20 million, in the making.

Iraj Parvizi, aka Fatty or the Mad Punter, a Bentley-driving, racehorse-owning Iranian, whose life had been one endlessly escalating wager, walked to the witness box with uncharacteristic anxiety. His hands shook, and he was dressed carelessly, in jeans, sneakers, and an untucked shirt. Parvizi was on trial in London for participating in what prosecutors described as the biggest insider-trading ring in U.K. history, and four co-defendants, the other alleged conspirators, looked on from the dock. It was Week 13 of the proceedings, a Wednesday in April, and Parvizi faced years in prison if convicted. Once he’d taken his place, his barrister reminded him: Just be yourself. The Mad Punter smiled and took control of the courtroom.
Resting one foot on a nearby chair, Parvizi described his anarchic life in the markets. “There are no rules,” he said. “Anyone can start a rumor. It’s just gung-ho, go for it, do what you want.” The jurors, who’d struggled to stay awake during discussions of contracts-for-difference and margin calls, were rapt, as if Parvizi were a different species. He’d gone from making doner kebabs to transacting with royals, he said, developing a network that never stopped gossiping about stocks. Three days into Parvizi’s testimony, prosecutors tried to show that his gains were the result of an illegal advantage. How had he traded up a fortune when ordinary investors struggle to get single-digit returns?
“You’re making out like I’m the only liar in the stock market,” Parvizi said. He described a world where rumors circulate on phone screens, fabricated stories are fed to a gullible press, and returns correlate with whom you know. The only difference between stocks and any other form of gambling, he said, as if talking to a roomful of children, is that the stakes are higher. His co-defendants nodded in agreement.
“When I was arrested,” Parvizi said at another point, “I was thinking, ‘Why isn’t every trader in the market being arrested?’ Where does insider trading start, where does it stop?”
From left: Andrew “Grant” Harrison, Benjamin Anderson, Iraj Parvizi
Photographers: Chris Ratcliffe/Bloomberg; Kirsty Wigglesworth/AP Photo; Matthew Lloyd/Getty Images
In a gallery at the back of the chamber, it was a small team of investigators’ turn to be nervous. Some of them had devoted eight years to the case. Operation Tabernula, as it was known, was a landmark for the Financial Conduct Authority, a rebuttal to critics who said the regulator was too soft. The FCA had compiled 46 binders of evidence and 320 hours of surveillance audio. But this wasn’t the U.S., where the government has a well-rehearsed routine of flipping targets and locking in plea deals. The men in the Tabernula dock liked their odds with a jury. In the same courthouse three months earlier, the FCA’s sister agency, the Serious Fraud Office, had seen a different trophy case collapse. The competence of British financial regulation was on trial, too.
Throughout the proceedings, the five defendants sat in a neat diagram of their alleged scam. In the front corner sat Martyn Dodgson, 44, a red-haired banker, dressed in chinos and boat shoes. To his left was Andrew “Grant” Harrison, 46, an olive-skinned New Zealander with slicked-back hair. Both had worked at investment banks, in positions that let them know in advance when companies were going to make deals.
In the row behind them sat a second pair—these two, major-league day traders. One was Parvizi. The other was Benjamin Anderson, a septuagenarian with a grandfatherly smile. Raised in Glasgow, the son of a grocer, he was now worth £100 million (about $142 million). These two, prosecutors said, had taken Dodgson’s and Harrison’s inside information and traded on it.
Finally, sitting apart from the others, was Andrew Hind, 56, a weasel-thin oddball with a degree in decision theory, a background in accounting, and a pair of reading glasses on top of his head. The government said Hind was the connection between the guys with the information and the guys with the money—a linchpin who ran operational security and distributed the profits.
From left: Andrew Hind, Martyn Dodgson
Photographers: Chris Ratcliffe/Bloomberg; Kirsty Wigglesworth/AP Photo
When the trial began, in January, prosecutors said the group had netted at least $10 million through insider trading. What made the case fascinating—what had the entire London financial scene watching and waiting for the precedent it might set—was that the defendants’ version of events wasn’t so different from that of the prosecution. Parvizi and the others acknowledged joining up to trade. They acknowledged disguising their activities with encrypted devices and burner phones. But, they maintained, they’d never knowingly traded on information that was, legally speaking, “insider.” The men said their investments, even those that were incredibly well-timed, stayed on the legal side of the line between privileged information and well-informed rumor.
The trial ran for four months, and at times Courtroom 3 became a circus. Anderson suffered a heart scare after two days on the stand, repeatedly delaying the proceedings. A reality-TV star sat in the audience. Harrison, making the most of the judge’s direction that the men could come and go as they pleased, barely showed up. Parvizi maintained his cool, even when his character was being savaged. During cross-examination, the lead prosecutor observed that lying appeared to come easily to him. Matter-of-factly, Parvizi replied, “Of course.”
Dodgson breezed through childhood in Lancaster, a pretty river town in the north of England, with a cricket bat under one arm. In 1993 he left home for London, and after a few years charmed the City’s elite investment banks, getting hired first at J.P. Morgan Cazenove and then at UBS as a corporate broker—a kind of professional glad-hander who smooths relations between companies and shareholders. Dodgson specialized in financial firms. Whenever one of UBS’s clients engaged in takeover talks or considered raising equity, Dodgson discreetly gauged how the move would go down with investors.
Dodgson had to know finance and economics, but really his job was about relationships. Despite its multitrillion-dollar size, the London equity market was a cozy place. The same institutional investors dealt with all the biggest firms, and Dodgson knew everybody. Witty and gregarious, he started an annual pub quiz night for investors and executives.
Then, in July 2001, at age 29, he went to his brother’s stag party in London. Dodgson’s brother worked at Topshop, and among the attendees was Hind, the fashion retailer’s onetime financial director. Hind was 41 and somewhat socially awkward, but he impressed Dodgson with his intelligence, connections, and wealth. The men lived near each other and began to meet for pints. The conversation always came back to the markets, and sometime around 2003 they struck an alliance. Hind had access to capital, prosecutors would later establish, and his young friend had a head full of potentially market-moving information. Hind would front the cash and arrange the trades; Dodgson would take half the gains or losses.
English law defines inside information as that which isn’t generally available and would be likely to have a significant effect on the price of a security if made public. For a crime to be committed, a person leaking inside information, or a person trading on it, must be aware that the material is privileged. To stay well clear of the line, banks have further rules about what an employee can and cannot do. Dodgson kept his arrangement with Hind quiet, knowing it would never pass muster with his employer.
Their trades made money, and Dodgson started to keep a spreadsheet of everything he was owed. In one column, he tracked progress toward a dream figure, £5 million, enough to retire from finance and maybe enter academia. Rather than transfer the winnings between bank accounts, which might have set off alarms, Hind often paid his partner in kind: £210,000 in home renovations and British Airways flights. Hind also gave Dodgson cash—on one occasion, he handed him £50,000 over a curry. Both men ploughed their profits back into small businesses. Hind dabbled in black vodka, high-end watches, and real estate. In 2006, after an introduction from a mutual associate, he flew to Dubai to meet a potential investor.
In 1977, Parvizi, the son of an Iranian diplomat, was sent to England for an education. When the revolution struck in 1979, his family lost everything. Parvizi didn’t finish school and spent his early adulthood drifting between jobs—double-glazing salesman, pizza delivery boy, kebab-shop worker. At 22 or 23, living in a seaside town in Kent, he went to a local poker game and saw a new face: a London gentleman named George Maxwell-Brown.
The new guy cleaned the Kent lads out. As the others cursed their luck, calling the man a hustler, Parvizi simply shook the stranger’s hand and said, “Thanks for the lesson.” Maxwell-Brown, impressed by his attitude, gave Parvizi his card, and soon after a job at his London business, which provided short-term loans to wealthy foreigners looking to buy assets in the U.K. Parvizi began mingling with Nigerian chiefs and Saudi princes and soon branched out on his own. He drove Bentleys and Ferraris; opened a combination spa-boutique-restaurant; and invested widely, in diamonds, property, and horses. In the 1990s he started betting on equities.
Surveillance photo of Parvizi walking with Anderson.
Source: Financial Conduct Authority; Photo illustration: 731
In 2000, at a stockbroker charity dinner, Parvizi met Anderson, then 56 and a legend in day-trader circles. Mathematically gifted, he’d created an eight-figure fortune out of nothing. A self-described parsimonious Scot, he shunned the trappings of wealth and reinvested his profits in areas from biotechnology to oil. Like Dodgson and Hind, Parvizi and Anderson made a pact to trade together, despite their obvious differences. Six weeks after Parvizi bought Anderson a Bentley, a gift after a particularly big win, Anderson gave it back, saying it was “too juicy”—it guzzled too much fuel.
With no formal training, Parvizi had little understanding of the minutiae of finance. He traded essentially without limits, gambling millions at 90 percent leverage; he’d later tell the court that he spread false rumors to move stocks. Parvizi moved to Dubai in 2003. In 2006, when his earnings totaled some £70 million, he took the meeting in Dubai with Hind, in an upmarket hotel lobby. Parvizi agreed to lend him £1 million for a new property venture. Other types of deals soon followed.
After that 2006 meeting, Hind and Dodgson, the fixer and the banker, now had access to the vast trading power of Parvizi and, through him, Anderson. At trial a decade later, prosecutors alleged that Dodgson would sniff out opportunities and pass them on to Hind, who handed them to the moneymen, Parvizi and Anderson, to execute the trades. Parvizi and Anderson acknowledged making the transactions but said that they dealt with only Hind and never knew if the information came from an insider. Dodgson, from his end of the operation, said he never knew who placed the bets.
Hind tried to keep the arrangement secret. He bought untraceable pay-as-you-go phones and made payments in cash and via Swiss bank accounts. In painstaking but opaque records, he referred to each member of the group by a nickname: The paunchy Parvizi was “Fatty,” and Dodgson was “Fruit.” (Privately, Parvizi called Hind “Nob,” British slang for the male member. Anderson, who was more polite, softened that to “Nobu.”) Later, Hind bought six “iron keys,” encrypted USB sticks that leave no trace after being plugged in. On an iPod he kept a memo titled “Dollar Operations Risks” that listed the group’s potential exposures, such as “fruit detection”—an apparent reference to the possibility of Dodgson getting caught. Outside of business, Hind was equally fastidious. He was fanatical about food, writing detailed notes on quinoa and the dangers of olive oil. When the financial crisis hit, he stocked up on canned goods and built an armory of spears, hockey sticks, and baseball bats.
The group’s first major score, according to the prosecution, came in October 2007. Dodgson had moved to Lehman Brothers, and his colleagues were advising Carlsberg on its bid with Heineken to acquire the U.K. brewer Scottish & Newcastle. On Oct. 15, Dodgson’s co-workers were readying a presentation on the deal, code-named Project Rainbow. Dodgson called or texted Hind six times that day. Records first show Hind looking up Scottish & Newcastle’s ticker, then Parvizi. The next morning, Parvizi and Anderson, using eight different brokerage accounts, started assembling a bet worth more than £30 million.
Rumors of a takeover hit the wider market on Oct. 17, and at 11:47 a.m. Scottish & Newcastle confirmed them. One minute later, Parvizi and Anderson started closing out their positions. The shares jumped 18 percent, and they made a £4.4 million profit. Spreadsheets later found in Hind’s home showed he received £562,000, of which half was reserved for Dodgson. Parvizi and Anderson would later say in court that Scottish & Newcastle had been hyped as a takeover target in the press for months, and their position at the moment the rumors were confirmed was a coincidence.
Parvizi once bet £5,000 on where a fly would land—and won
It was a sensational start, but there were only so many big-ticket mergers-and-acquisitions deals to trade on. Expanding into small- and mid-cap companies would offer more opportunities. A few weeks after the beer deal, Dodgson set up a lunch with Harrison, a tall, suave former colleague from UBS who now worked at the stockbroker Panmure Gordon. The New Zealander agreed to join the group. Hind nicknamed him “Little.” At trial, Harrison would say he was recruited by Hind only for his general market knowledge and not for specific intelligence about his clients.
One of Harrison’s clients was NCipher, an internet security company. A few months after the lunch, shares in the company had fallen. Harrison was one of a limited number of people who knew the company had received two takeover offers, and prosecutors would later allege he passed that information to Hind. On May 8, 2008, Parvizi and Anderson bought shares worth £168,000. On July 8, Harrison e-mailed a colleague to say a deal had been struck; Parvizi and Anderson bought an additional £669,000 the next day and more the day after that. On July 10, when NCipher notified the market it was in late-stage takeover talks, the share price jumped 73 percent. Parvizi and Anderson made a £724,000 profit. Hind’s records show Harrison received £41,000. An electronic Post-it note from the time, later retrieved on Harrison’s PC, had four characters: “n+41.”
Prosecutors said that from 2006 to 2010, the group made investments in 59 companies, at least six of which they alleged crossed the line into insider trading. But that was a tiny fraction of the scores of transactions Parvizi and Anderson made each week. The pair had traded prolifically for years, using dozens of brokerage accounts. Later, they accused prosecutors of cherry-picking the trades where they’d profited and ignoring the many where they’d lost out.
In the meantime, Parvizi kept living as only he could. He owned thoroughbreds, including a Breeders’ Cup champion, and played poker with Premier League footballers in the cordoned-off Red Room at Les Ambassadeurs, the casino from Dr. No. Parvizi would bet on anything. He once wagered £5,000 on which wall a fly would land on—and won.
In the spring of 2005, London’s moneymen had little cause to fear their overseer, the Financial Services Authority. Funded not by taxpayers but by the industry it was meant to guard, the FSA had a mandate to foster market stability, protect consumers, and reduce financial crime. At the last, it was struggling. The FSA had just been forced to reduce a fine on an insurance company after admitting a string of errors, and a formal review of its enforcement abilities was under way.
The agency’s headquarters were in a slightly dated structure in Canary Wharf, literally in the shadows of financial-company skyscrapers. One day that spring, in a seventh-floor boardroom, three executives were interviewing candidates for the job of head of enforcement. They asked one of the finalists, Margaret Cole, how she’d fix the FSA. Cole had an answer ready: “Insider dealing.”
It was a surprisingly radical suggestion. The FSA had never prosecuted anyone for insider trading. The agency saw itself more as a facilitator than as a watchdog and took the view that dodgy behavior could usually be handled with a stern phone call to a bank’s chairman. But Cole had come from the private sector, where success was measured in results. Birdlike, with sandy hair and intelligent eyes, she was a litigator who’d made her name helping pensioners swindled by the media tycoon Robert Maxwell, before he fell off his yacht and drowned.
Cole got the job. A few weeks later, she attended an internal briefing on a suspected insider-trading ring. One of the conference room walls had a vast diagram linking individuals and companies around the world. Maybe things aren’t so dire after all, Cole thought. She asked, “When will we get to a prosecution?” A staffer replied, “About four years.” Cole returned to the FSA board and told them they didn’t have a single worthwhile criminal insider-trading case. They’d have to start from scratch.
Over the next two years, Cole eliminated about a third of the agency’s enforcement staff and set up a mixed team of lawyers, IT specialists, forensic accountants, and investigators, drawing from both inside and outside the agency. She also increased the FSA’s powers. She successfully lobbied the British government to extend the law to allow the FSA to offer plea deals to cooperative suspects, as U.S. regulators do. And she persuaded the Serious Organised Crime Agency (SOCA), a law enforcement unit focused on drugs and gangs, to lend its surveillance powers.
Cole also invested millions in technology to detect unusual market activity. The FSA began to better scrutinize the “suspicious transaction reports” (STRs) that brokerages file on customers who change their behavior or go on improbable streaks. These efforts started to produce prosecutions, albeit minor ones: a solicitor and his father-in-law; a dentist and his son; a group of opportunists who worked in the printing rooms of investment banks. But Cole wanted to go after organized, habitual offenders with links to the biggest firms.
On Oct. 17, 2007, a spread-betting firm filed an STR on traders who’d made a killing on the Scottish & Newcastle deal. Cole’s team recognized two names that had cropped up on such lists before: Anderson and Parvizi. The investigators built profiles of the pair. For years, they found, Parvizi and Anderson had beaten the market with incredible regularity. In the past, the FSA would have done little. Now it asked SOCA’s plainclothes officers to tail the men.
Anderson kept an office on the ground floor of a gray stone building in Belgravia, a gracious neighborhood of Georgian houses and private garden squares. In August 2008 the police broke in and installed a bug behind the refrigerator. Two months later, on a mild morning amid the financial crisis, Parvizi came over to talk to the man he affectionately called “Uncle.”
Surveillance photo of Hind in his BMW.
Source: Financial Conduct Authority; Photo illustration: 731
The two men discussed a debt Hind had run up, and after a time Parvizi walked out of the office and into a waiting silver BMW 4x4. Hind was sitting in the driver’s seat and pulled into the London traffic. A police photographer captured the moment from across the street. Less than an hour later, Parvizi was back inside the office. Hind had agreed to pay back the money he owed, he assured Anderson. And that wasn’t all.
“Deutsche Bank,” Parvizi said. “He’s working at Deutsche Bank.” Without using Dodgson’s name, Hind had told Parvizi that Dodgson had again changed employers, this time from Lehman to the German investment bank. It was one of London’s biggest M&A advisers and a potential fountain of lucrative intelligence.
“He says he’s hungry,” Parvizi told Anderson. Dodgson had “done his bollocks”—slang for going nearly broke. “Because you know he worked for Morgan?” Parvizi said. “He says he got f---ed on Lehman’s shares as well.”
Then Parvizi uttered a phrase that would haunt him at trial: “We’ll be the only ones getting it.” Prosecutors said it was a reference to getting nonpublic information ahead of the rest of the market. Parvizi said he was simply relaying what Hind had told him and didn’t believe it to be true. Anderson said he didn’t give it any credence because Parvizi was, by his own admission, prone to exaggeration.
Six miles east, on the 27th floor of a building in Canary Wharf, Cole’s investigators listened to the conversation with a mixture of joy and disbelief. Parvizi hadn’t said Dodgson’s name, but by laying out his work history, he’d given the FSA enough to trace the inside man. It was also the first time the FSA had heard about Hind. Cole’s big prosecution was falling into place.
Dodgson had been in bed for four hours when he woke to a banging at his door. It was 5:40 a.m. on March 23, 2010, and he was severely hung over. Almost 18 months had passed since Parvizi had unwittingly outed him, and Cole’s team had spent the time meticulously building a case. Now, waiting on the doorstep of Dodgson’s four-story Hampstead home were more than a dozen police officers and investigators.
They read Dodgson his rights and piled into the property, ransacking drawers and grabbing papers, laptops, and phones. In a kitchen cupboard, they found a dossier marked “confidential,” which outlined News Corp.’s proposed takeover of BSkyB—documents which, as a financial-sector specialist, he had no reason to possess. Under a bed, in a small, locked red box, was the iron key Hind had bought him three years before.
Shocked and nauseous, Dodgson was driven through the London streets to Holborn police station. At the same time, similar operations were taking place across the capital, in Oxfordshire, and in Kent. Hind was seized at his home in Muswell Hill, along with three more iron keys stashed in a metal wall safe in his study. Parvizi was picked up at the London Clinic, a private hospital in tony Marylebone. He’d contracted a throat infection and was wired to an IV drip when the police entered his room. Anderson was arrested the next day, at Gatwick Airport, as he returned from a holiday in St. Lucia. The authorities weren’t aware of Harrison yet, and his home wouldn’t be searched for another two years. When Dodgson was interviewed that afternoon, he denied everything; Hind, Anderson, and Parvizi, advised by their lawyers, clammed up.
Sixteen locations, including Deutsche Bank’s London headquarters, were targeted by 200 police officers and FSA investigators. Several other individuals were also arrested in relation to a suspected second, loosely connected trading ring. Cole helped coordinate events from a command center on a vacant floor at FSA headquarters. As the evidence started arriving she allowed herself a moment of self-congratulation. Dramatic newspaper accounts appeared within hours. Cole was compared to Eliot Ness, the U.S. agent who brought down Al Capone. The headline in the Evening Standard: “Margaret Cole: The City Ball-Breaker.”
An early conundrum was gaining access to the iron keys. The devices had a security feature that wiped out files after 10 failed password attempts. Several tries in, the authorities were getting desperate. The breakthrough came when they found an e-mail sent by Dodgson, a car fanatic, just before he left Lehman. Included on the list of PINs and passwords was “Lamborghini55.” When they tried it on his iron key, it worked. Among the unlocked files was a balance sheet, itself protected with the code “maserati,” that detailed Dodgson’s shifting assets and liabilities. One column, headed “trading,” laid out transfers between him and Hind.
Anderson had made hand-scrawled records in notepads that made little sense at first glance. Parvizi kept virtually no records. Hind had a detailed chronicle of the arrangement, but his notes were shrouded with codes and shorthand.
Eventually, the forensic team linked the various documents. On a master spreadsheet, Hind had listed the companies the group had traded in, the profits, and the sums the various participants were owed. When compared with Anderson’s and Dodgson’s accounts, many of the figures tallied. The records were cross-referenced with trading data and logs of the various e-mails, texts, and phone calls among the men.
On Oct. 19, 2012, Dodgson, Hind, Anderson, and Parvizi appeared at Westminster Magistrates’ Court charged with conspiracy to commit insider trading. It was the first time they’d all been in the same room.
“If everyone told the truth, the stock market would not move”
Southwark Crown Court is an austere 1980s brown-brick cube on the south bank of the Thames. The five defendants—Harrison was charged in 2013—took their seats inside on Jan. 14, 2016. Six years had elapsed since their arrests, during which, unable to work, most had separated or divorced. Cole had left the FSA, which itself was gone—replaced, in a post-crisis reform, by the Financial Conduct Authority.
The new agency was represented by Mark Ellison, a storied criminal lawyer who’d argued for the British government on cases relating to the legality of the invasion of Iraq. The first few days of the trial were gripping: code names, encryption, secret rendezvous. The jurors were enthralled. Then came weeks of details about trading data and phone records, the tedium of any white-collar investigation, and their enthusiasm waned.
The defendants gave their side of the story six weeks in. Hind and Harrison declined to testify. The first to take the stand was Dodgson. Calmly and articulately, he insisted he’d never discussed confidential client information with Hind, and that the BSkyB documents in his kitchen cupboard must have been picked up from a printer at work by mistake.
Anderson, in a woolen sweater, had the demeanor of a kindly elder statesman. Only when Ellison probed him about the suspicious timing of the trades and the bugged conversation in his office did a bite creep into Anderson’s Scottish lilt. Many of the companies they invested in were long known to be M&A targets, he said. If they had access to price-sensitive information, why had they lost so much money on other trades?
And then there was Parvizi’s testimony. Jurors laughed as he explained how nothing he said could ever be taken at face value, because he was an incurable exaggerator—a habit he referred to as “adding VAT,” after the British sales tax, to his comments. I’ll give you an example, Parvizi told Ellison in a vicious tone: “You’re a very, very handsome man.” The courtroom roared. For the FCA investigators in the gallery, it was torture.
Only on the third day, when Ellison’s cross-examination began, did things appear to unravel. Parvizi’s defense was essentially that the entire market was built on bluster. He maintained he’d never known the basis of Hind’s information. In his world, he said, it was an unspoken rule never to ask the source of a tip. “In every rumor there is uncertainty,” he said, dismissing the idea that he was ever in receipt of a sure thing. But Parvizi also volunteered that he’d started a few rumors: He described phoning a Financial Times journalist to “plant the seed” about a potential bid for Sky and told how he’d made money on a penny stock by fabricating a story about a Malaysian businessman.
The judge abruptly stopped the proceedings and sent the jury out. Parvizi appeared to have admitted to making misleading statements—a criminal offense, but not one he was charged with. The judge advised Parvizi that he didn’t have to answer any further questions that might incriminate him. Parvizi was aghast. As far as he was concerned there was only one rule: Thou shalt not trade on what thou knowest to be inside information. When Ellison explained that there were quite a few other laws—a whole book of them, in fact—Parvizi began to flounder. “If everyone told the truth,” he said, looking around the courtroom for support, “the stock market would not move.”
The jury deliberated from April 25 to May 9. Hind read a textbook. Parvizi checked stock prices on his phone. He’d recently changed his WhatsApp profile picture to an image of two dice—one that read “guilty,” the other “not guilty.”
Finally the jury returned and read its verdict for each man in turn. The first two, Dodgson and Hind, were found guilty—and then Parvizi, Anderson, and Harrison were all acquitted. Harrison patted Dodgson’s shoulder, and Anderson squeezed Hind’s hand. Parvizi left immediately, without acknowledging his co-defendants, exiting the courtroom with a smile on his lips.
Three days later, Dodgson and Hind returned to be sentenced. Harrison came in support; at one point, returning from a break, he accidentally walked to his old seat in the dock. Dodgson’s and Hind’s lawyers offered mitigating circumstances—young children, drugs, divorce—but Judge Jeffrey Pegden wasn’t moved. Insider dealing is “not a victimless crime,” he said. Pegden gave Dodgson four and a half years, the longest-ever U.K. sentence for the crime, while Hind got three and a half. They were led out of the dock, Hind wheeling a large suitcase behind him.
At a press briefing, FCA investigators did their best to spin the outcome as a victory. Every conviction sends a message, they said. Three other men arrested in the related March 2010 raids had pleaded guilty, bringing their overall hit rate in the Tabernula probe to five out of eight.
The FSA and then FCA had devoted eight years and $20 million to the case—double the defendants’ alleged profits. And Parvizi and Anderson, whose uncanny trading had triggered the investigation, had walked free. Was it worth it? Cole, who has a new job as general counsel of PwC, thinks before answering. “Insider-trading cases will always be difficult,” she says. “They are time-consuming and expensive, and if you’re a smart City trader, you’re unlikely to leave a smoking gun. But it’s crucial that they stick with it.”
Regardless of his acquittal, the Mad Punter is likely done with the stock market. Before the verdict, during his testimony, Parvizi said that no trader would ever talk to him again. “I’m in court to tell the truth,” he said. “The game is up.”