Disney employee finds out the hard way: Insider trading doesn’t pay

Disneyland may be the happiest place in the world, but one Disney employee and her boyfriend are not smiling.

The Securities and Exchange Commission has filed a complaint in the U.S. District Court for the Southern District of New York charging Bonnie Jean Hoxie, an administrative assistant to a high-level Disney executive, and her boyfriend, Yonni Sebbag, with attempting to sell confidential financial information. Both Hoxie and Sebbag are California residents.
 
In her trusted position, Hoxie had access to secrets about Disney’s operations, as well as financial performance data. Because of her position, she was asked to sign a confidentiality agreement, in which she agreed “…to hold in strictest confidence, and not disclose to any person, firm or corporation… any confidential information or trade secret relating to the products, sales or business of [Disney] and not to use any such confidential information or trade secret for [her] own benefit during the term of [her] employment or thereafter.”
 
The agreement did not stop her, however, from joining forces with Sebbag in early March and send anonymous letters to more than 20 hedge funds in the United States and Europe, according to the charges.
 
The letters were postmarked from Los Angeles, and stated:
 
Hi, I have access to Disney’s (DIS) quarterly earnings report before its release on 5/03/10 [sic]. I am willing to share this information for a fee that we can determine later. I am sorry but I can’t disclose my identity for confidentiality reasons but we can correspond by email if you would like to discuss it. My email is eilatcap@gmail.com.I count on your discretion as you can count on mine. Thank you and I look forward to talking to you.
 
The letters offered to reveal before they were officially released results from Disney’s earnings from the second quarter of this year in exchange for a fee. The SEC complaint states that one offer letter mentioned a fee of $15,000, and another asked for half of the expected trading profits. Some of the hedge funds that received letters contacted the SEC. The SEC, in turn, reached out to the U.S. Attorney and the FBI to initiate an investigation.
 
As part of the probe, the FBI sent an undercover agent, posing as an investment manager, to meet with Sebbag, who used the alias Jonathan Cyrus. According to the agent, Sebbag said he had confidential information to share on a regular basis in exchange for compensation. He wanted a “business relationship,” and said that he understood this relationship would involve risks.
 
Sebbag sent e-mail messages to the agents, some of which the SEC reprinted (complete with original spelling and punctuation errors):
  • "First of all, i am not a fed, I have no way to prove it at this point but i am not asking you to disclose your identity not i will disclose mine. It is up to you to determine if this is worth the risk as i did. I work for Disney, that is all i can tell you."
  • "I can deliver 3 to 4 days before release. I will email you the report as soon as i have it and you will wire transfer the money to my account after you get ahold of it. I am asking you to make me an offer based on the capital gains from the trade and the risk i am taking delivering this information to you? Also, i am looking to build a strong business relationship with you for future quarters and information."
  • "I dont think we will get caught if we stay discret and careful. You can count on my discretion as i am counting on yours…"
  • "… $15k sounds great and $30k even better as i hope you will make a killing from Q2 earnings. I promise i will keep you informed of any unanticipated event, i keep my ears wide open here."
 
Sebbag provided the agents with a 107-page confidential document two days before the company’s earnings were announced. The documents contained talking points for the Disney executives for an upcoming conference call and detailed information about quarterly performance and future prospects. Hoxie also gave Sebbag Disney’s earnings per share, which he gave to the agents two hours before the figures were to be released.
 
After the exchange, Sebbag made plans to meet with the agents again in person to collect his fee. On May 14th, the complaint states, he met with agents in New York telling them he wanted to make a lot of money and asked their advice on opening an offshore account in which to stash the cash. He left the meeting with $15,000 and an arrangement to meet again in California. On May 26th, the couple was arrested.
 
Related blogs:

You may like these other stories...

Bank Leumi said to face $300 million demand in tax caseDavid Voreacos and Greg Farrell of Bloomberg reported on Wednesday that New York’s banking regulator will ask for more than $300 million to settle an investigation...
Mike "the Situation" Sorrentino, one of the stars on the former TV show "Jersey Shore," is in the middle of…well, a tax situation.On October 23, the erstwhile reality show attraction was arraigned...
Deal to lock in US tax cuts is bubbling up on the HillSome US lawmakers are exploring a post-election deal that would lock in permanent tax cuts for major corporations and low-income families, Richard Rubin of Bloomberg...

Already a member? log in here.

Upcoming CPE Webinars

Nov 5Join CPA thought leader and peer reviewer Rob Cameron and learn ways to improve the outcome of your peer reviews while maximizing the value of your engagement workflow.
Nov 18In this session Excel expert David Ringstrom, CPA tackles what to do when bad things happen to good spreadsheets.
Nov 19How do you minimize redundant work and unnecessary steps to maximize the amount of work moving through your firm?
Nov 20Kristen Rampe will share how to uncover new opportunities with your clients by asking powerful questions.