Belmont Resident Caught in Insider Trading Scheme

When providing a friend a tip at the Oakley Country Club on Belmont Street, best leave it to what club to use off the 18th hole and not what financial institution your bank is about to purchase.

If Belmont resident John Patrick O’Neill had heeded that advice, he and his golfing partner and fellow Oakley member, Robert Bray, wouldn’t have found themselves under arrest Monday by the United States Attorney’s Office. That office, along with a separate civil action filed by the Securities & Exchange Commission, accused the pair of an alleged blatant case of insider stock trading.

O’Neill, who currently works at TD Bank, was released on $200,000 bond after his arrest on conspiracy to commit securities fraud charges.

According to a series of press releases by several law enforcement agencies released Monday, Aug. 18, O’Neill, a senior vice president and senior credit officer at the time at Eastern Bank, told his golfing buddy Bray on June 11, 2010 that his bank was close to purchasing Boston-based Wainwright Bank and Trust. O’Neill was a member of Eastern Bank’s due diligence team evaluating Wainwright in the weeks leading up to the deal.

The next trading day, Monday, June 14, the Cambridge native hot tailed it to his stockbroker to buy 25,000 shares of Wainwright stock, which he acknowledged to the broker “kinda sounds crazy” as the stock had shown little trading activity selling between $8.85 and $9.90 per share. Eventually, Bray purchased 31,000 shares over the next two weeks, accounting for a whopping 56 percent of the total trading volume in Wainwright over the fortnight.

On June 29, according the US Attorney Carmen Ortiz, Eastern Bank announced its agreement to acquire Wainwright for $19 per share in cash, a premium of nearly 100 percent more than the stock’s prior closing price. Bray then sold his 31,000 shares for a profit of more than $300,000.

But as Vincent Lisi, special agent in charge of the FBI in Boston said Monday, “there are many tripwires in place to detect suspiciously timed trades and as a result of those tripwires numerous people in the Boston area have been charged with insider trading based on parallel FBI and SEC investigations.”

“The risk versus reward calculation for insider trading should be clear based on the increasing number of those recently charged,” said Lisi.

The maximum sentence under the statute is five years in prison and a fine of the greater of $250,00 or twice the gross gain or loss.