Roswell Man Gets 2-Year Prison Sentence For Insider Trading
Eric M. Martin was one of three men who pleaded guilty to insider trading conspiracies involving Atlanta-based Carters, Inc.
A Roswell resident was one of three men who were sentenced to federal prison on Tuesday for their roles in insider trading conspiracies involving Atlanta-based Carter's Inc. stock.
Eric M. Martin, 44, of Roswell was sentenced to two years in prison to be followed by three years of supervised release. He was also ordered to pay $950,000 in restitution and perform 80 hours of community service.
Duluth resident Richard T. Posey, 53 received one year and three months in prison, which will also be followed by three years of supervised release. He will also have to pay $750,000 in restitution and perform 80 of community service.
Mark Megalli, 42, of New York City was sentenced to one year and one day in prison to be followed by 3 years of supervised release. He will have to pay $50,000 in restitution and perform 100 hours of community service.
A fourth defendant, Steven E. Slawson, 67, of Lebanon, New Jersey, was indicted by a grand jury on May 20. The case has been assigned to U.S. District Judge Richard W. Story for trial, a date for which has not been set.
"Illegal insider trading undermines confidence in the nation’s stock markets," said said United States Attorney Sally Quillian Yates, adding these sentences are a step towards restoring that confidence. "These sentences send a strong message to company insiders and investment industry professionals in this district and elsewhere that they are required to follow the same rules that govern regular investors, and that the consequences for failing to do so can be severe."
Carter’s, a children's clothing company, is a public corporation registered with the U.S. Securities & Exchange Commission, and its common stock is listed on the New York Stock Exchange. Martin was employed as Carter’s director and later vice president of investor relations between 2003 and March 2009.
In his role, Martin participated in and helped the company’s key executives prepare for Carter’s public disclosure of its quarterly and annual financial results at the end of each quarter or fiscal year.
These and other duties afforded Martin regular access to material, non-public information about Carter’s upcoming earnings releases and other significant developments and transactions.
On a consistent basis between early 2005 and his separation from Carter’s in March 2009, Martin disclosed material, non-public information about Carter’s upcoming earnings releases and other developments to a former Wall Street analyst identified by the government as “Cooperator Number 1,” for the purpose of making illegal insider trades.
That analyst repeatedly bought and sold Carter’s stock on the basis of this information, earning substantial illegal profits and illegally avoiding substantial losses. Cooperator Number 1 also tipped others, including Titan Capital Management LLC, a New Jersey hedge fund that had retained him as an outside consultant. Martin disclosed this and other material, non-public information in exchange for friendship, reciprocal stock tips about other public companies to which Cooperator Number 1 had access, and future business and networking opportunities.
After Martin separated from Carter’s in March 2009, he continued to obtain inside information in advance of Carter’s earnings releases and other events from Posey, a former Carter’s co-worker.
Posey was employed as a vice president of operations for various Carter’s brands and divisions and later as vice president of operations for the company’s wholesale sales business from around July 2002 until his termination in January 2013.
Posey disclosed the information to Martin from early 2009 through July 2010 in exchange for friendship, reciprocal stock tips and future business and networking opportunities. In turn, Martin traded on the information himself and also continued to provide the inside information to Cooperator Number 1 and others through July 2010.
Around September 2009, Martin began providing the inside information to several financial institutions and investment firms that hired him as an outside consultant, including multibillion dollar New York hedge fund Level Global Investors LP. Martin’s contact at Level Global was Mark Megalli, who was employed as the portfolio manager for Level Global’s consumer sector.
For his part, Megalli caused Level Global to execute multimillion dollar trades in Carter’s stocks based on the inside information received from Martin from September 2009 through July 2010.
Martin and Posey also traded in Carter’s stock for their own benefit on the basis of material, non-public information in advance of Carter’s earnings releases and other events during their employment with the company. This trading took place during company-wide trading blackout periods that preceded the company’s quarterly and annual earnings releases, even though company policies prohibited company insiders from trading in Carter’s stock at those times.
Martin’s illegal trading and tipping of others between 2005 and 2010 resulted in over $7 million in insider trading gains and losses avoided for Martin and his downstream tippees.
Posey’s illegal trading and tipping of Martin between 2009 and 2010 resulted in over $5 million in insider trading gains and losses avoided.
Megalli’s illegal trading between 2009 and 2010 resulted in over $3 million in insider trading gains and losses avoided for Level Global.