MANHATTAN – Mitchel Guttenberg, a former executive director of equity research for UBS Securities, pleaded guilty Wednesday to a “massive insider trading scheme” that took more than $10 million in illegal profits. Guttenberg, 42, admitted he sold inside information from unreleased UBS analyst reports to David Tavdy, 39, who traded on the information, and who also pleaded guilty.
Guttenberg sold to Tavdy and another, unnamed person advance information on whether UBS was about to upgrade or downgrade a stock’s prospects, prosecutors said. Tavdy would then buy shares before the anticipated price rise, or sell shares short before the expected fall.
In one transaction involving a downgrade of Caterpillar stock, Tavdy sold short 11,000 shares, purchased them after the announcement, and netted $30,000, the U.S. Attorney’s office said. Tavdy netted another $20,000 by buying 7,300 shares of Goldman Sachs based on inside information that UBS was upgrading the stock from “neutral” to “buy.” Both these trades were in 2006.
Guttenberg faces up to 90 years in prison on six counts of conspiracy and securities fraud at his June 2 sentencing. Tavdy faces up to 45 years on three similar counts. He will be sentenced on June 30.