Risk Management

Legal Separation for Insider-Trading Couple

An ex-Morgan Stanley finance executive and her husband both get 18 months in jail for trading in securities of soon-to-be-acquired companies.
Stephen TaubDecember 5, 2007

A former Morgan Stanley finance executive and her husband were each sentenced to 18 months in prison for trading on insider information relating to acquisitions of three publicly traded companies.

Jennifer Wang, a former Morgan Stanley finance department executive, and her husband, Rubin Chen, a former ING hedge fund executive, pleaded guilty in September in one of the first in a series of recent “pillow-talk” cases, in which married couples exchange insider information, brought by the SEC and the Justice Department

The sentences were imposed by United States District Judge Colleen McMahon in Manhattan federal court.

At the sentencing, U.S. District Judge Colleen Judge McMahon said the prohibition on insider trading was a “bright-line rule” that is “indoctrinated” to all who work on Wall Street, according to a press release from Michael Garcia, the U.S. Attorney for the Southern District of New York.

Before imposing sentence, the Judge also stated that insider trading “cheats the entire investing public. It is a serious crime. . . . Only a sentence of incarceration promotes respect for this law.”

According to Garcia, 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.

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 that, 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.

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