Worker pleads guilty to snooping on emails for stock deals

AP News
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Posted: Dec 05, 2016 5:31 PM
Worker pleads guilty to snooping on emails for stock deals

SEATTLE (AP) — A former information technology worker at Expedia Inc. pleaded guilty Monday to securities fraud after authorities said he used his access to the computers of top executives to rummage through their email, then made lucrative, illegal stock trades based on the inside information he discovered.

Prosecutors said Jonathan Ly, 28, of San Francisco made more than $330,000 from trades done with the information from 2013 to 2015.

"I deeply regret what happened in the last couple of years," Ly, choking up, told The Associated Press after the hearing. "It was a huge mistake on my part."

Ly pleaded guilty to one count of securities fraud in U.S. District Court in Seattle and is expected to face a potential sentence of about two years. He has agreed to pay the Securities and Exchange Commission $376,000 and to reimburse Expedia $81,000 for costs associated with the investigation.

Ly worked for the Bellevue, Washington-based online travel giant but was based in the San Francisco office of one of its brands, Hotwire.com. Prosecutors said he was given the passwords and network credentials of company employees so he could remotely access their computers to address technology issues.

Among those whose electronic files he read were Expedia's chief financial officer and head of investor relations. Many of the illegal trades he made were in anticipation of quarterly earnings reports which had not yet been made public. Others preceded the announcement of a strategic marketing agreement with Travelocity and U.S. Justice Department approval of Expedia's purchase of Orbitz.

Even after leaving Expedia for another job in April 2015, Ly kept an Expedia laptop and continued using it to remotely access executives' accounts.

The company said in an email that it discovered the unauthorized access through enhanced monitoring practices.

"The irony of our increasingly digital world is that the greatest threat to our networks is a human one," U.S. Attorney Annette L. Hayes said in a written statement.

She praised Expedia for quickly contacting the FBI after identifying the computer intrusion: "Their willingness to do the right thing made it possible to effectively investigate and prosecute the matter — protecting our financial markets from unfair manipulation."

As of Monday, Ly was working in an IT job at the software company Adobe. His attorney, John M. Runfola, asked U.S. Magistrate Judge Mary Theiler to delay notifying Adobe about Ly's conviction until the end of the month, which he said would allow Ly to receive a $12,000 benefit through an employee stock purchase program — money that could be used to help repay his legal obligations, Runfola said.

The judge declined, noting that Adobe would likely learn immediately through news reports, and that the company has a right to know of any similar danger Ly might pose. Adobe did not immediately return a call seeking comment.

"It is one of the court's responsibilities to impose conditions that reasonably protect the public," Theiler said.

Runfola said after the hearing that Ly began working for Expedia in Hawaii, where he grew up, and then transferred to San Francisco, where he had trouble keeping up with the more expensive cost of living. Some of the money he made was used to help pay for his wedding in Hong Kong to a woman who teaches preschool in the San Francisco Bay Area, Runfola said.

"He's very remorseful for what he did and stunned at the consequences," the lawyer said.

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