Jury Convicts Two Out Of Five Defendants In Insider Trading Case

Legal Experts Say Case Shows Difficulty For FCA To Secure Convictions


Kate Rawlings, Press Officer | 0114 274 4238

A legal expert at law firm Irwin Mitchell says a case which saw three out of five defendants acquitted after being accused of insider trading demonstrates the difficulties the Financial Conduct Authority (FCA) faces, to secure convictions.

The case, which has been heralded as one which will go down in British legal history, saw an ex-City banker and a former finance director being found guilty of conspiring to insider deal, by a majority verdict, on Tuesday.

Accountant Andrew Hind and former Deutsche Bank director Martyn Dodgson were convicted for the offences which took place between November 2006 and March 2010, at London’s Southwark Crown Court and each face a maximum seven-year jail term.

The jury acquitted three other defendants on trial: former stockbroker Andrew Grant Harrison, private day trader Benjamin Anderson and former director Iraj Parvizi.

The ‘Tabernula’ case, as it became known, followed an operation by the Financial Services Authority and Serious Organised Crime Agency.

The FCA, who brought the case to court, hailed the result after previously coming under pressure to prove itself as a City watchdog.

Operation Tabernula began in March 2010 with a series of dawn raids that resulted in seven arrests and three convictions – of former traders Graeme Shelley, Paul Milsom and Julian Rifat – as a consequence of the investigation.

The case concerned the trading of shares in several top companies after close personal friends, Dodgson and Hind instigated the insider dealing conspiracy.

The FCA said they put in place ‘elaborate strategies designed to prevent the authorities from uncovering their activities’ which included the use of unregistered mobile phones, encoded and encrypted records, safety deposit boxes and the transfer of benefit using cash and payments in kind.

The jury retired to consider its verdict on 25 April but were instructed last week that a majority verdict, would be accepted.

The pair, who netted a profit of £1.1m profit between them, are expected to be sentenced later this week.

Sarah Wallace, head of regulatory & criminal investigations group at Irwin Mitchell, said that even though it was only a partial success for the FCA, the regulator would see the convictions as a victory.

Expert Opinion
After a mammoth investigation lasting many years, the FCA will be relieved to have achieved at least two out of five guilty verdicts, but the acquittal of three demonstrates how difficult it can be for a dedicated enforcement team with extensive resources, experienced lawyers and manpower to achieve convictions.

The FCA may be questioning whether they directed their resources at prosecuting the right people.

What is interesting though is whether the criminal prosecution campaign against insider dealing devised by Margaret Cole, the former FCA Enforcement Head, will continue under the current head of enforcement. These cases take years to plan, investigate and prosecute and the last few years were dominated by LIBOR enquiries as opposed high profile large insider dealing investigation like this one.
Sarah Wallace, Partner

Find out more about financial crime.