Risk & Compliance

Couple Plead Guilty in “Pillow-talk” Case

A former Morgan Stanley finance executive and her husband, a former ING hedge fund exec, are guilty of insider trading.
Tim ReasonSeptember 6, 2007

Jennifer Wang, a former Morgan Stanley finance department executive, and her husband, Rubin Chen, a former ING hedge fund executive, pleaded guilty Wednesday to criminal insider trading charges. The case was one of the first in a series of recent “pillow-talk” cases, in which married couples exchange insider information, that have been brought by the SEC and the Department of Justice.

According to Michael Garcia, the United States Attorney for the Southern District of New York, Wang and Chen traded in the securities of Town and Country Trust, Glenborough Realty Trust, and Genesis Health Care, based on material, nonpublic information that Wang, a vice-president in Morgan Stanley’s finance department, gleaned about mergers and acquisitions between these companies from December 2005 through March 2007.

According to Garcia, Wang and Chen conducted their trading in an account set up in the name of Wang’s mother and hidden from their respective employers, according to Garcia, who said the couple netted over $600,000 from the scheme.

Morgan Stanley was advising its subsidiary, Morgan Stanley Real Estate, on the acquisition of Town and Country Trust and Glenborough Realty Trust. According to the government’s charges, Wang had access to documentation regarding MSRE’s attempted but unsuccessful acquisition of Town and Country, and successful acquisition of Glenborough, before its bids were made public.

Likewise, the government charged, in December 2006, Morgan Stanley’s Principal Transactions Group received information relating to financing a potential acquisition of Genesis.

According to the charges, Wang obtained access to a shared computer drive that contained information relating to the potential acquisition. Wang passed the information she obtained from Morgan Stanley to her husband, then the vice-president who managed hedge fund investments in the Fund of Funds department at ING Investment Management Services.

Wang and Chen both resigned earlier this year following a Securities and Exchange Commission inquiry and internal investigations by Morgan Stanley and ING.

In May, the SEC brought civil charges against the pair for insider trading. At the time, the couple’s attorney, David Spears of Spears & Imes, told CFO.com that Wang and Chen intended to plead not guilty to any criminal charges brought, and defend themselves against any charges made by the SEC. On Wednesday, the pair each pleaded guilty to criminal charges, including one count of conspiring to commit insider trading and three counts of insider trading.