Guttenberg’s Printing Press Shut Down With Sentencing

One of the more notorious insider trading rings of recent history ended with a whimper today as UBS executive Mitchel Guttenberg was sentenced to 6.5 years in custody:

In March 2007, federal authorities accused Guttenberg, then an executive director in the UBS equity research department, of illegally tipping others to upcoming analyst stock upgrades or downgrades.

The commission says he gave the information to two Wall Street traders, Erik R. Franklin and David M. Tavdy, in exchange for sharing in the profits they made from trading on that information. The two traders, in turn, tipped others who traded on the information, including all whose settlements were just approved by a federal judge in New York. Portfolio

Guttenberg's devious plan included coded text messages and cash payments, but he did not think through every angle and was ultimately brought down by a group of independent prop traders who latched on the the scheme, knowing an easy buck when they saw it.

And, believe it or not, this story even had connections to the movie "Boiler Room".

But you have to rewind the clock a few years....when David Glass, who inspired Giovanni Ribisi’s character in the movie, was running blackjack tables out of his queens apartment..

After a summer internship at PaineWebber, Glass decided to leapfrog to Wall Street by dropping out of school a year early to work for Sterling Foster, a brokerage in Long Island. Sterling Foster was a classic “pump and dump” scam, in which phone salesmen would sell unsuspecting investors on stock in obscure tech companies, bidding up the share price so Sterling Foster’s owners could quickly cash out when the stock peaked, leaving their clients holding the bag.

While Glass was working there, his brother introduced him to Ben Younger, a fellow Queens College alum and an aspiring filmmaker from the neighborhood. Younger needed work, so Glass got him an interview at Sterling Foster. “He was my friend’s younger brother, and he was driving a new sports car,” Younger told New York Magazine in 2000. “This guy tells me, ‘Look, you work here for a year, you make your million bucks, go to the Bahamas, then you can write.’ I was like, ‘Um, I’ll check my book, but I’m pretty sure this fits into the game plan.’ ”

Younger decided instead that he’d found his movie idea. “I walked in and immediately realized, This is my movie. I mean, you see these kids and you know something is going on. I was expecting guys who went to Dartmouth, but they were all barely out of high school, sitting in a room playing Game Boys.”

The film that resulted was Boiler Room.

A year ago rumors circulated that vestiges of Glass’ Jasper Securities might even live on…

Former colleagues claim Glass is already back on Wall Street, financially backing another group of traders in a lower-Manhattan day-trading firm. Not that Glass is advertising it: Two people say they spotted Glass in July entering a day-trading shop located just one block from Jasper’s old offices. When he noticed a former colleague, Glass yanked his blue baseball cap down and lifted a newspaper in front of his face.

The next time you notice a position acting funny in front of news, well, there might be a reason. Somebody always knows something, whether it is kosher or not. But before you bury the entire episode check out New York Magazines year-old account of the most notorious ring since Boesky/Levine.

You can’t make this shit up.

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October 28, 2007
The Sucker Wears a Wire
New York Magazine

UBS Executive Sentenced to Federal Prison
Portfolio

Ex-broker draws probation for insider trading role
Reuters
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Not safe for work...Boiler Room set a record for F-bombs in a movie.

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The content contained represent the opinions of 1440 Wall Street. This commentary in no way constitutes a solicitation of business or investment advice. It is intended solely for the entertainment of the reader, and the author.

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