LA Times
A secretary — who works for Walt Disney Co.'s head of corporate communications — and her boyfriend are accused of sending anonymous letters to hedge funds offering advance notice of the company's earnings reports.
A secretary to a high-ranking Walt Disney Co. executive thought she and her boyfriend were about to pull off an alleged insider-trading scheme — and she wanted to celebrate with a Stella McCartney handbag from Neiman Marcus.
"Here is the bag that you are going to get for me," Bonnie Jean Hoxie, a secretary for Zenia Mucha, Disney's head of corporate communications, allegedly wrote in an e-mail to her boyfriend this month.
After the boyfriend, Yonni Sebbag, replied that they may reap a windfall from their plot, Hoxie added to her wish list, according to court documents. "In that case, I also love love [sic] these shoes," she wrote.
Their alleged caper never got off the ground as the hedge fund managers to whom the pair thought they were selling inside information on Disney's quarterly earnings were actually undercover FBI agents on a sting operation.Federal authorities arrested the couple early Wednesday morning and charged them with criminal wire fraud in what experts described as one of the more ham-handed attempts at insider trading in memory.
"Disney's top comedians could not have written a better insider-trading script," said Jacob Frenkel, a former prosecutor now at Shulman Rogers Gandal Pordy & Ecker in Rockville, Md.
Hoxie, 33, and Sebbag, 29, both of L.A., were each charged with one count of wire fraud and one count of conspiracy to commit securities fraud and wire fraud. They face up to 20 years in prison on the wire fraud charge and up to five years on the conspiracy charge.
Hoxie, who appeared composed during her arraignment in federal court in Los Angeles on Wednesday afternoon, was released on $50,000 bail and ordered to appear June 3 in federal court in Manhattan, N.Y.
Sebbag, speaking in heavily accented English, was deemed a flight risk and ordered detained by Judge Patrick Walsh.
The hearing was for bail purposes only, and pleas were not entered. Neither the defendants nor their lawyers commented on the charges.
Disney issued a statement saying it is cooperating with the investigation.
Insider-trading networks are typically close-knit groups that go to great lengths to shield their activities. Hoxie and Sebbag, by contrast, allegedly sent anonymous letters offering early peeks at earnings reports to nearly three dozen hedge funds, which promptly tipped off the authorities.
"This is the insider trading equivalent of the bank robber who drops off the demand note and comes back in an hour to pick up the money," said Robert A. Mintz, a former federal prosecutor who is a partner at McCarter & English in Newark, N.J. "It's mind-boggling that somebody would even try to get away with something like this."
The FBI set up a meeting May 14 in which agents posing as hedge fund traders gave Sebbag $15,000 as payment for a 107-page confidential document on Disney's quarterly earnings.
The arrest shocked Hoxie's father, who said her Disney job was the best one she'd had in a decade of living in Los Angeles.
"It can't be for financial reasons that I could understand. It's got to be, for lack of a better word, for love or a relationship with this guy," said Patrick Hoxie, contacted in Jackson, Mich. "She lives in a dinky apartment, drives an old car. She has a real basic lifestyle."
The alleged scheme is spelled out in a series of e-mail messages released by the Justice Department and Securities and Exchange Commission.
Sebbag told undercover agents that he was "looking to build a strong business relationship" and that "I don't think we will get caught if we stay discrete [sic] and careful."
In a meeting arranged by the agents, Sebbag allegedly said he wanted "to make a lot of money" and asked for their guidance in opening an offshore bank account to avoid detection. He told the agents he "didn't want to go to jail," the SEC said.
Other e-mails show the tensions that arose when Hoxie couldn't get Disney's earnings report as quickly as Sebbag wanted.
"What would you suggest I do," she wrote to him. "If I could wave my magic wand and give you what you want — I would. However, since that is not going to happen I suggest you call on you inner Buddhist — and CHILL … out."
To prove his legitimacy, Sebbag proffered the tip that Disney Chief Executive Bob Iger was "in serious and advanced negotiations with two private equity firms to sell the ABC network."
Disney issued a rare statement, saying any reference to conversations about the sale of ABC "were and are false."
The e-mail exchange came four days after Disney's annual shareholders' meeting March 11, where Iger was asked if he would ever contemplate selling ABC or its news division. The executive responded that "there are no guarantees in terms of what will remain part of our company," sparking speculation that the network might be on the block.
At the time, a network spokesman said the comments had been misinterpreted, and that the network was not for sale.
As insider-trading cases go, this was an easy one to crack, experts said.
"Most criminals make stupid mistakes," said Seth Taube, a former SEC enforcement lawyer now at Baker Botts in New York. "But some are stupider than others, and this one ranks pretty high on that scale."
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