Operation Tabernula: Hind and Dodgson sentenced in insider trading case
Martyn Dodgson has been sentenced to four and a half years in prison today, while Andrew Hind has been given three and a half years, for their roles in a landmark insider trading case.
Accountant Hind and former Deutsche Bank director Dodgson were convicted on Monday of conspiring to insider deal between November 2006 and March 2010, after being brought to trial by the Financial Conduct Authority (FCA) as part of Operation Tabernula.
Dodgson and Hind could have been given a maximum sentence of seven years each, and Dodgson's sentence is the longest to date for an insider dealing case brought by the FCA.
"Insider dealing is ever more detectable and provable," said Mark Steward, director of enforcement and market oversight at the FCA. "And this case shows lengthy terms of imprisonment, not profits are the real result."
The Operation Tabernula investigation, which was a joint operation launched by the Financial Services Authority (the FCA's predecessor) and the Serious Organised Crime Agency (the predecessor of the National Crime Agency, or NCA) lasting eight and half years, has resulted in five convictions. It cost just shy of £14m in internal and external costs and required 10.5tb of data storage.
"The NCA was able to support the FCA by carrying out surveillance and providing niche capabilities, including the deployment and monitoring of a listening device that recorded key conversations," said Oliver Higgins, NCA Branch Commander. "We will continue to work with our partners to pursue and prosecute anyone who seeks to undermine financial systems, abuse markets, and poses a serious economic crime threat to the UK."
In addition to Dodgson and Hind, the operation's scalps include Graeme Shelley, Paul Milsom and Julian Rifat who all pleaded guilty at earlier dates.
Equities trader Milsom was handed down a two-year sentence, while former Moore Capital trader Rifat was given 19 months in prison and a £100,000 fine. Shelley, meanwhile, was spared jail time in return for a two-year suspended sentence.
The recent court case did not go entirely in favour of the FCA, with former Panmure Gordon stockbroker Andrew Grant Harrison, private day trader Benjamin Anderson and former Aria Capital director Iraj Parvizi, who had all been on trial alongside Dodgson and Hind, walking free on Monday after they were found not guilty by the jury.
Therese Chambers, head of department at the FCA, said in a press briefing prior to sentencing: “The welter of circumstantial evidence which created an enormous patchwork and jigsaw that the jury had to digest over a three month period, much of which was highly technical information, even to secure a single conviction is a tremendous success.”
She added: “It’s not the FCA’s job to act as judge and jury on these cases. It’s the FCA’s job to investigate and prosecute these cases.”
The FCA has called Operation Tabernula its “largest and most complex insider dealing investigation”. Although the City will remember the starting point as a series of dramatic morning raids in 2010, the watchdog had been working behind the scene since 2007, looking into suspicious transaction reports which had been filed relating to trades Anderson and Parvizi had been involved in. The Operation Tabernula team then followed these up by approaching brokers to assist them in their investigation.
“It looks as though they really, really took great care to keep our inquiries secret because all it took was just someone to say something to someone close to Anderson and Parvizi and the cat would be out the bag,” said Samiullah Khan, associate at the FCA.
The FCA also ran into difficulty along the way of their investigation, as Dodgson and Hind had gone to extreme lengths to hide their activities, including using Ironkeys – an encrypted USB stick designed to be suitable for use by the US military – to store information.
“What they didn’t count on was our determination to pierce their veil of secrecy,” said Khan.
The FCA has also said that it intends to pursue confiscation proceedings against Dodgson and Hind.