A federal prosecutor said two longtime friends went on an insider trading binge, making more than $2.6 million in illegal profits on pharmaceutical stocks before they were arrested Thursday in a crackdown aimed at secret sharing on Wall Street that has "become all too commonplace."
Scott Allen, 45, of Atlanta and John Bennett, 48, of Norwalk, Conn., surrendered to face securities fraud charges. Allen had worked at Mercer, a global human resources consulting firm. Bennett was an independent film producer and former investment professional, authorities said.
"Scott Allen and John Bennett were old friends who chose to profit from that friendship by breaking the law," U.S. Attorney Preet Bharara said in a news release. "Illegal insider trading has become all too commonplace in all too many quarters, and we will continue our efforts to prosecute and punish those who flout the securities laws."
Allen was released on $500,000 bond after a brief court appearance in federal court in Atlanta. Bennett was released on $500,000 bail after an appearance in federal court in Manhattan.
Henry Mazurek, a lawyer for Bennett, declined to comment. Brian McEvoy, a lawyer for Allen, noted that an indictment has not yet been handed down.
"He is, in fact, not guilty," McEvoy said. "If he is indicted, Mr. Allen looks forward to proving his innocence at trial."
The charges each man faces carry a maximum penalty of 45 years in prison and more than $10 million in fines.
A criminal complaint alleged that while working as a financial consultant, Allen got inside information about April 2008 and September 2009 acquisitions by pharmaceutical companies. It said he fed the information to longtime friend Bennett, who was a stock trader at the time.
The complaint said Bennett used the information to make $2.6 million on trades. In return, he gave Allen $100,000 in kickbacks, the court papers said.
Authorities said both men made efforts to conceal their close friendship. Prosecutors said Allen lied in October 2010 when he told FBI agents that he had not spoken to Bennett in three or four years when he had spoken to him repeatedly until at least July 2010.
In a statement, Mercer spokesman Charles Salmans said the company was fully cooperating with the investigation concerning a former employee. He said Mercer is not a subject or target of the investigation.
Associated Press Writer Tom Hays contributed to this report.