Equity Trader Sentenced to 30 Months in Federal Prison and Ordered to Disgorge More Than $3.5 Million in Illegal Profits on Securities Fraud Conviction
DALLAS—Daniel Lutz Bergin, 42, of Dallas, was sentenced Friday afternoon by U.S. District Judge Barbara M. G. Lynn to 30 months in federal prison following his guilty plea in July 2014 to one count of securities fraud, announced Acting U.S. Attorney John Parker of the Northern District of Texas. Bergin was also ordered to pay a money judgment of $1,384,603 and a $500,000 fine with additional disgorgement in a companion case brought by the Securities and Exchange Commission of approximately $1.7 million-resulting in total monetary remedies in the case that exceed $3.5 million. Judge Lynn ordered that Bergin surrender to the Bureau of Prisons on or before June 23, 2015.
According to plea documents filed in the case and the evidence presented at sentencing, Bergin was an equity trader at Cushing MLP Asset Management, LP (Cushing), a registered investment advisor located on Preston Road in Dallas. Cushing had approximately $2.5 billion in discretionary assets under management. Cushing provided advisory and portfolio management services to institutional clients, including high net worth individuals, investment companies, pooled investment vehicles, pension and profit sharing plans, charitable organizations and state/municipal government entities.
Beginning in at least January 2010 and continuing until his termination on May 23, 2013, Bergin devised and executed a “front-running” scheme in which he misused “inside” or “material, non-public” information when placing trades in a personal brokerage account held in the name of his wife. Bergin’s front-running scheme involved (a) obtaining material, non-public information from his employer concerning large orders to purchase or sell securities for its advisory clients; and (b) subsequently executing trades in the same securities, prior to the execution of the larger customer orders, in anticipation of the movement in price that the large trade was likely to cause. The government’s evidence at sentencing identified 696 transactions in which Bergin traded in energy MLP securities at the same time as Cushing traded in the same securities. Over the course of the scheme, Bergin’s profits from the illegal trading exceeded $3 million.
In furtherance of the scheme, Bergin made false statements and material omissions to Cushing, in violation of Cushing’s Code of Ethics in connection with the front-running trades. In particular, although Bergin disclosed certain personal brokerage accounts held in his name at Fidelity and Scottrade, Bergin failed to disclose brokerage accounts maintained at Fidelity in the name of his wife. After Bergin’s and his wife’s Fidelity accounts were closed by Fidelity, Bergin opened E*TRADE accounts in his wife’s name, which were not disclosed to Cushing as required, and which he continued to use to make unlawful front-running trades.
The evidence at sentencing also established that Bergin made false statements to the SEC in connection with his personal trading, and then continued engaging in illegal front-running trades up until the date of his termination.
Today’s announcement is part of efforts underway by President Obama’s Financial Fraud Enforcement Task Force (FFETF) which was created in November 2009 to wage an aggressive, coordinated and proactive effort to investigate and prosecute financial crimes. With more than 20 federal agencies, 94 U.S. attorneys’ offices and state and local partners, it’s the broadest coalition of law enforcement, investigatory and regulatory agencies ever assembled to combat fraud. Since its formation, the task force has made great strides in facilitating increased investigation and prosecution of financial crimes; enhancing coordination and cooperation among federal, state and local authorities; addressing discrimination in the lending and financial markets and conducting outreach to the public, victims, financial institutions and other organizations. Over the past three fiscal years, the Justice Department has filed more than 10,000 financial fraud cases against nearly 15,000 defendants including more than 2,900 mortgage fraud defendants. For more information on the task force, visit www.stopfraud.gov.
The FBI investigated with assistance from the Fort Worth Regional Office of the Securities and Exchange Commission. Assistant U.S. Attorney J. Nicholas Bunch prosecuted.