Former COO of Wireless Retailer Pleads Guilty to Selling Confidential Information to Financial Services Firm
BOSTON—A Connecticut executive pleaded guilty today in U.S. District Court in Boston to charges that he sold confidential business information regarding the wireless industry to an analyst at a Boston-based financial services firm.
“Today’s guilty plea confirms that the sale of confidential business information by corporate insiders—in violation of their duties to employers, business partners, customers, or shareholders—is a crime. And that is true whether the information is used to cheat the stock markets via insider trading, or for some other purpose,” said United States Attorney Carmen M. Ortiz.
“Mr. Dunham abused his position and violated his duty to his employer, customers, and shareholders by stealing business secrets for personal gain,” said Vincent B. Lisi, Special Agent in Charge of the Federal Bureau of Investigation, Boston Field Office. “The FBI hopes this case sends a clear signal to business insiders that breaching a duty of confidentiality by misusing information will not be tolerated.”
James Dunham, 59, of Glastonbury, Conn. pleaded guilty to one count of wire fraud after being arrested and charged in February 2015. U.S. District Court Judge Douglas P. Woodlock scheduled sentencing for Sept. 3, 2015.
Dunham, formerly the Chief Operating Officer (COO) of a retailer for a major provider of wireless services, had access to confidential information regarding sales, compensation, and product launches at the retailer’s 400 locations. For more than two years, Dunham had a secret consulting agreement with a financial services firm to provide confidential information in return for which he was paid $2,000 per month.
The charging document identifies seven research notes prepared and distributed by the financial services firm that include information supplied by Dunham, including information regarding the status of certain product launches, the number of new subscribers to a specific wireless provider, and sales and return information for specific smartphones. In particular, Dunham was the source for an April 11, 2013, research note in which the firm reported that returns were exceeding sales for a specific smartphone. Following distribution of that note, the stock price for the smartphone manufacturer dropped seven percent in a single day.
The charging statute provides for a sentence of no greater than 20 years in prison, three years of supervised release, and a fine of the greater of $250,000, or twice the gross gain or loss. Actual sentences for federal crimes are typically less than the maximum penalties. Sentences are imposed by a federal district court judge based upon the U.S. Sentencing Guidelines and other statutory factors.
U.S. Attorney Ortiz and SAC Lisi of the FBI made the announcement today. The United States Attorney’s Office received valuable assistance from the Securities & Exchange Commission. The case is being prosecuted by Assistant U.S. Attorney Sarah E. Walters, Chief of Ortiz’s Economic Crimes Unit.