An Insider Trader Caught On Tape Tells All
DAVID GREENE, HOST:
OK, Renee, can I just hand you a picture here to take a look at? Tell me what you see.
RENEE MONTAGNE, HOST:
Yeah, sure. OK. Two men kind of hidden behind some cars, one seeming to be handing an envelope to the other man.
GREENE: Yeah, looks kind of shady - doesn't it? - in the parking lot there.
GREENE: Well, one thing you can't see in the photo, but that we know about is this envelope is stuffed with $100 bills. And it's actually pretty rare that we even see this because it's a photo of a crime we hear about a lot, but don't often see. And it captures insider trading in action. Here's Jacob Goldstein from our Planet Money team.
JACOB GOLDSTEIN, BYLINE: Often in insider trading cases, the person who commits the crime does not want to talk about it. This case is different.
So you're the guy in the photo.
SCOTT LONDON: I am the guy in the photo. Yeah (laughter).
GOLDSTEIN: This is Scott London, the man photographed taking that envelope full of cash.
LONDON: I've been - well, I was a CPA.
GOLDSTEIN: A CPA - a certified public accountant - and he was good at it. He worked at a big accounting firm and rose through the ranks until he was managing hundreds of people. As part of his job, he oversaw corporate audits, which gave him access to information that would be worth a lot of money to people outside those companies. And Scott had this one friend - a friend named Bryan Shaw.
LONDON: We went out for dinner, and we played golf, and we occasionally traveled together.
GOLDSTEIN: Bryan Shaw ran a jewelry business, and right after the financial crisis, that business was in bad shape. One day, Bryan made this proposal to Scott.
LONDON: He goes, hey, I know a way that we can both make a little bit of money.
GOLDSTEIN: According to Scott, his friend said, you give me some information about things like profits and mergers before the rest of the world knows about it. Then I'll trade on it, make some easy money and kick some of it back to you.
LONDON: My initial reaction was that, you know, he's joking. I just - you know, I said, like, you know we can't do that.
GOLDSTEIN: But Bryan kept asking, and Scott started to consider it. He definitely did not need the money. He was earning over $500,000 a year.
What was going through your head at the time?
LONDON: A battle - the simple version of one side is that I knew it was wrong. It was stupid. And then the other side is all right, well, he's a good friend. I trust him.
GOLDSTEIN: So Scott did it, and he says Bryan would always want to pay him back somehow. Sometimes it was jewelry. Sometimes it was cash. One time, Bryan called and asked to meet in person.
LONDON: He absolutely wanted me to get this money in my hand. Is there any way he could meet me?
GOLDSTEIN: They met at a Starbucks parking lot. Nearby there was a camera, hence that photo that would later be all over the press of Scott taking that envelope stuffed with money.
LONDON: Five thousand dollars in cash - 50 $100 bills.
GOLDSTEIN: What do you do with 50 $100 bills?
LONDON: To be specific, I put it in my underwear drawer in my closet.
GOLDSTEIN: To be clear, it's probably always a bad idea to meet someone in a parking lot to get an envelope stuffed with hundreds. In this case, the handoff is what makes this such a clear-cut insider trading case. If Scott had just given his friend insider information, if he hadn't taken anything in return, he probably would have got in some trouble, but he would not have been guilty of insider trading because under insider trading law, the person providing the information has to benefit in some clear away. And so when the FBI showed up at his house not long after that, Scott immediately knew what it meant.
LONDON: It was like, OK, what's my wife going to say? What are my friends going to say? Oh, [expletive], I'm going to lose my job. Oh, [expletive] I'm going to go to prison.
GOLDSTEIN: Scott pleaded guilty and was sentenced to 14 months in prison. Bryan Shaw, who declined to comment for this story, also pleaded guilty and was given a shorter sentence.
There is one last question that Scott still asks himself. Why did he do it? Was it for the thrill?
LONDON: No, wasn't exciting at all. More than anything, it was a nuisance.
GOLDSTEIN: Was he trying to get his friend to like him more? Was that it?
LONDON: No, that didn't ever pass through my mind.
GOLDSTEIN: As dumb as it seems, as best as he can reconstruct, he says he did it to help out a friend. But he says crossing over the line, doing the wrong thing was somehow much easier than it should have been. Jacob Goldstein, NPR News. Transcript provided by NPR, Copyright NPR.