Risk & Compliance

Banker Accused of Tipping Off Plumber to Deals

The tips enabled the plumber to trade ahead of merger announcements and profit from the rise in targets' share prices, said the SEC.
Matthew HellerMay 31, 2016

A former director at Barclays PLC has been charged with tipping off his “boat dock buddy” to impending deals involving clients as part of an insider trading scheme that netted $76,000 in illicit profits — and a remodeled bathroom.

The U.S. Securities and Exchange Commission on Tuesday said Steven McClatchey, 58, provided confidential information to close friend Gary Pusey, a plumber whom he met at the marina where they kept their fishing boats. The tips allegedly enabled Pusey to execute trades ahead of merger announcements involving companies including Forrest Oil and PetSmart.

In addition to facing the SEC’s civil complaint, McClatchey was arrested Tuesday on parallel criminal charges. The SEC said Pusey paid McClatchey thousands of dollars in cash for the tips and also provided free services to remodel his bathroom.

A Better Way to Do Ecommerce

A Better Way to Do Ecommerce

Learn how Precision Medical leveraged OneWorld to cut the cost of billing in half and added $2.5M in annual revenue.

Pusey pleaded guilty Monday to one count of conspiracy to commit securities and wire fraud.

“McClatchey violated his confidentiality duty at an investment bank when he shared insider material information with his boat dock buddy, Gary Pusey, who ultimately used the information to make trades,” FBI Assistant Director-in-Charge Diego Rodriguez said in a news release.

Barclays was not identified by name in court papers but the bank told Reuters it was McClatchey’s employer. He worked for Barclays’ investment banking division in New York from 2008 to late 2015 and, according to the SEC, his duties included collecting up-to-date information on potential M&A transactions involving clients.

The SEC said McClatchey met Pusey in 2011 or 2012 and they soon became “very close friends,” going fishing or boating together almost every Saturday. He allegedly began tipping him off to deals in early 2014.

“Using the tips provided by McClatchey, Pusey traded in advance of at least ten deals and reaped over $76,000 in illicit profits,” the SEC alleged.

In the case of PetSmart, McClatchey allegedly told Pusey on Nov. 18, 2014, that Barclays’ client BC Partners was pursuing an $8.8 billion acquisition of the company. Pusey acquired PetSmart stock later the same day and, after the deal was announced on Dec. 14, 2014, made a profit of $6,048, the SEC said.