Home San Francisco Press Releases 2014 Michigan Resident Sentenced to 18 Months in Prison for Obstructing SEC Investigation

Michigan Resident Sentenced to 18 Months in Prison for Obstructing SEC Investigation

U.S. Attorney’s Office April 15, 2014
  • Northern District of California (415) 436-7200

SAN FRANCISCO—Karim Iskander Bayyouk was sentenced today to 18 months in prison for obstructing an investigation by the Securities and Exchange Commission (SEC) into insider trading, announced U.S. Attorney Melinda Haag and FBI Special Agent in Charge David J. Johnson.

Bayyouk, 49, of Livonia, Michigan, was found guilty by a jury on September 3, 2013, of one count of obstruction of justice, in violation of 18 U.S.C. § 1505. The jury found that on or about May 31, 2007, Bayyouk obstructed and impeded an SEC investigation into securities fraud and insider trading relating to Biosite Incorporated securities. The guilty verdict followed a five-day jury trial before the Honorable Edward M. Chen, United States District Court Judge in San Francisco.

Evidence at trial showed that on or about March 23, 2007, Bayyouk purchased approximately $100,000 in Biosite call options. Two days later, on March 25, 2007, Biosite announced it was merging with another company. After the merger announcement, Bayyouk sold the options and realized a profit of approximately $947,922. On or about May 31, 2007, attorneys from the SEC’s Division of Enforcement in San Francisco, California, conducted a telephone interview of Bayyouk as part of an insider trading investigation. During the interview, Bayyouk falsely stated, among other things, that he did not speak to anyone before investing in Biosite, that no one suggested Biosite to him, and that he did not suggest Biosite to his brother, who also traded Biosite call options on March 23, 2007. Evidence showed that the defendant traded in Biosite based on a tip from Bassam Salman, his brother-in-law.

On September 30, 2013, in a separate trial, Salman was found guilty by a jury of one count of conspiracy to commit securities fraud, in violation of 18 U.S.C. § 371, and four counts of securities fraud, in violation of 15 U.S.C. §§ 78j(b) and 78ff. On April 9, 2014, Salman was sentenced to three years in prison and ordered to pay $738,539.42 in restitution.

Judge Chen also sentenced Bayyouk to three years of supervised released and ordered him to pay a $5,000 fine.

Adam A. Reeves and Robert S. Leach are the Assistant U.S. Attorneys prosecuting the case, with the assistance of Maryam Beros, Rayneisha Booth, and Patricia Mahoney. The prosecution is the result of a lengthy investigation by the FBI, with substantial assistance from the Division of Enforcement of the SEC’s San Francisco Regional Office.

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