A former Ameriprise broker faces six months in prison and a $100,000 fine after being sentenced for insider trading.
In November of last year, a jury in the U.S. District Court in Eastern Pennsylvania found Timothy J. McGee, a franchisee advisor with Ameriprise, guilty of insider trading after he and several acquaintances allegedly netted upward of $1.8 million in trades executed prior to the 2008 merger of two insurance companies. McGee claimed that he had no knowledge of the impending merger. He was also convicted of lying under oath.
The case alleged that McGee found out about the impending sale through a connection at Alcoholics Anonymous. An executive at the company, Philadelphia Consolidated Holding, a publicly traded insurance holding company, confided in McGee that the stress of the merger was driving him to break his sobriety.
After finding out more details, McGee made a large investment in the company on three occasions. He was then alledged to have tipped off his business partner Michael Zirinsky, who was also an Ameriprise advisor. McGee made purchases in some of his Ameriprise client accounts as well. All told, those involved were accused of reeling in a total of $1.8 million, of which McGee scored $292,128, according to a separate and pending civil case filed by the SEC.
Although McGee did not take the stand, he and his attorneys denied that those conversations happened. They said McGee had made a trade in the security a year before and that someone else in the office had been doing research on the company prior to the trade.
McGees attorneys also contended that even if McGee had been told of the merger, there was no expectation of confidentiality within his relationship with the executive at Alcoholics Anonymous, so it would not violate SEC guidelines on misappropriation of nonpublic information.
Frank Costello, the U.S. attorney prosecuting the case disagreed. In the end, the jury found that McGee had engaged in insider trading.
McGee knew and reasonably should have known that the Executive expected that McGee would maintain the confidentiality of any material nonpublic information McGee learned from the executive, the Grand Jury filing stated.
In the end, Judge Timothy J. Savage opted for a six-month prison term and $100,000 fine, below the general guideline sentence of 41 to 51 months.
McGees attorney declined to comment on his defendant's behalf, but did say that they plan to appeal the decision.
In addition, McGee and others still face a pending civil suit from the SEC over similar charges over whether he shared the information with associates.
Ameriprise had no comment.
McGee did not respond to a message requesting comment.