Risk Management

Ex-PwC Pals were Inside Traders, SEC Says

Employees of the audit firm were caught using confidential information about potential deals to buy and sell stocks when the price was right.
Alan RappeportJanuary 15, 2008

The Securities and Exchange Commission charged two former employees of PricewaterhouseCoopers with insider trading Tuesday, accusing them of using client information to buy stock prior to corporate takeovers. PwC reported the co-workers, who were friends, to the SEC.

Gregory Raben, 30, formerly an auditor at PwC, and William Patrick Borchard, 28, formerly a senior associate in PwC’s transaction services group, did not admit or deny the allegations. Raben agreed to return trading profits of $22,879 and to pay an additional penalty of the same amount. Borchard, a certified public accountant, will pay a penalty of $20,835 and faces an injunction preventing him from practicing before the SEC for at least three years.

“Raben and Borchard violated PwC’s rules on keeping client information strictly confidential and ignored their duties to their employer and its clients,” said Marc Fagel, Co-Acting Regional Director of the SEC’s San Francisco Regional Office.

According to the SEC’s complaint, Borchard, who handled financial due diligence for clients interested in mergers and acquisitions, divulged controversial plans to Raben, his friend and co-worker. Raben would then use the information to make trades before the news of a deal became public. This occurred six times during 2006 until PwC’s office of general counsel uncovered the scheme that October and reported it to the SEC. One of the firms audit partners was tipped off when he noticed Raben’s name on the list of traders for Embarcadero Technologies, an acquisition target of a PwC client.

The SEC said that Raben netted more than $20,000 in profits from buying stocks before acquisitions and then selling his shares after their prices spiked. Making small individual trades, Raben purchased a total of $97,181 shares of stock in six companies and reaped a 21.4 percent return. He also shared confidential information with two other acquaintances that made several thousand dollars in illegal trading profits, the SEC said. Both Raben and Borchard resigned from PwC last year.

Borchard’s lawyer, Ed Swanson, and Raben’s lawyer, Diane de Seve, did not return CFO.com’s calls for comment.