It seems "greed is good" isn't a mantra reserved solely for stock brokers on Wall Street. A former Morgan Stanley (MS) trader in Hong Kong was sentenced Friday to seven years in prison in what's been called the biggest local insider trading case.
In addition, the banker, Du Jun, a 40-year-old Beijing native, was ordered to pay fines of HK$23.3 million ($3 million), after being found guilty last week on nine counts of insider trading in 2007. He faces an additional year in jail should he fail to pay the fine within nine months. Du was also found guilty on one count of advising his wife to deal in shares.
The scale of Du's crime is unprecedented, said Judge Andrew Chan in sentencing Du. The scam undermined the integrity of Hong Kong as Asia's financial center, the judge said. "I can't think of another reason other than being driven by sheer greed for his action."
It is the stiffest sentence ever handed down in Hong Kong for a case involving insider trading. Du, who earned more than $2 million a year at Morgan Stanley, showed little emotion as Judge Chan chastised him for his "greed" and "dishonesty and fraudulence," the Associated Press reported.
It isn't known whether Du will appeal the conviction. When asked, his attorney told a reporter merely, "Use your common sense."
Du, who worked at Morgan Stanley from 2001 to 2007, is the sixth person to be jailed for insider trading since Hong Kong officials began cracking down on the crime. The Securities and Futures Commission, a local regulator, has won convictions in all 10 cases it has brought since the city made insider dealing unlawful in 2003, Bloomberg News reported.
Du's conviction last week involved trading $11 million worth of shares in Citic Resources Holdings (CTJHF), while he was advising the company on the purchase of oil-related assets in North China and Kazakhstan. Du funded the purchase of the shares using HK$50 million in margin financing from Morgan Stanley, more than double his 2006 basic salary and bonus of HK$19 million, Bloomberg reported.
Morgan Stanley reported the matter to regulators. Du's misconduct "was identified by the firm and reported, and the employee was terminated," company spokesman Nick Footitt told Bloomberg News earlier this month.
Judge Chan found the New York-based company's compliance system "deficient." Du had sought approval from his superiors and the firm's compliance department prior to trading the shares. He used a Morgan Stanley broker account for the transactions.
Nevertheless, Judge Chan concluded that Du "must have realized he's over the wall and he was clearly over the wall," referring to rules to which employees must adhere when they have material, non-public information on a deal.
Du was tried in District Court, which can impose only a maximum sentence of seven years, Bloomberg reported.
Former Morgan Stanley trader jailed for seven years