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A former Foley & Lardner LLP partner used information gleaned from internal client documents to make illegal stock trades, according to charges filed Thursday by the Southern District of New York and the Securities and Exchange Commission.
Prosecutors allege Florida real estate lawyer Walter “Chet” Little, who left Foley for Bradley Arant Boult Cummings LLP in Tampa last year, made trades based on pending corporate announcements from seven Foley clients, and passed on details to a neighbor to make trades of his own.
Collectively, the two made more than $1 million in illegal profits from February 2015 to February 2016, court documents claim. The neighbor, Andrew Berke, made $640,651, prosecutors say, with Mr. Little profiting by $363,797.
Attorneys for the two men didn’t immediately respond to requests for comment Thursday.
A Foley & Lardner spokesman said the firm learned about the trading activity last June and, after an internal investigation, Mr. Little left the firm. “We take this matter very seriously, and we have zero tolerance for actions that violate our core values and the trust our clients place in us,” the spokesman, Daniel Farrell said, adding that they reported their findings to authorities and have cooperated with the investigation.
Bradley Arant chairman and managing partner Beau Grenier said Mr. Little is no longer with the firm as of Thursday, when it learned about their partner’s arrest and the allegations against him. The firm had no prior knowledge of the investigation, he said, and is “deeply committed to upholding and exceeding the highest ethical standards and professional conduct.”
The case is the latest example in recent years of prosecutors accusing law firm employees of using internal documents for insider trading. Cases involving employees at Wilson, Sonsini, Goodrich & Rosati PC and Simpson Thacher & Bartlett LLP got widespread attention and served as a wake-up call for law firms that their internal systems may not be secure enough.
In the Foley case, 43-year-old Mr. Little allegedly used 11 announcements related to mergers and acquisitions, securities offerings, earnings releases, and a trading suspension that he had permission to access on the firm’s internal systems.
The lawyer didn’t do any work for the clients in question—including Whiting Petroleum, Magnetek Inc., Oshkosh, and Harley Davidson—while he made the trades, according to the complaint.
The two face criminal charges of securities fraud, conspiracy to commit securities fraud, along with related civil charges from the SEC.
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