Asia-Pacific

Two charged with Disney insider trading plot

(Agencies)
Updated: 2010-05-27 09:48

LOS ANGELES/NEW YORK - A Walt Disney Co employee and her boyfriend have been charged with a "brazen" insider trading scheme in which they said the media conglomerate was in advanced talks to sell its ABC TV network.

Disney quickly said that claim was false. But the incident, which came to light on Wednesday after a months-long FBI undercover sting operation, is an irritant for a company known for a carefully spun image.

Shares in Disney leapt as much as 4.7 percent before backtracking after the denial to end the day up 2.3 percent.

US prosecutors accuse Bonnie Hoxie, an assistant to Disney's corporate communications chief, and Yonni Sebbag of trying to sell insider information to over 30 hedge funds.

"It's a total embarrassment for Disney, but it can happen to any company," said Alan Gould, an analyst with Soleil Research. "What's far more interesting from the share value perspective is if they are selling ABC."

US prosecutors have been cracking down on insider trading but this investigation is not part of the closely watched probe that ensnared Galleon hedge fund founder Raj Rajaratnam and 20 others last year from Wall Street to Silicon Valley.

Court documents said Hoxie and Sebbag conspired from March through May 25 of this year to try to profit off confidential information available to her as assistant to a top executive.

Hoxie is accused of giving information about Disney's earnings to Sebbag, who in turn tried to sell it to US and European hedge funds, according to criminal and civil charges filed in New York on Wednesday.

The assistant and Sebbag -- also known as Jonathan Cyrus -- were arrested by FBI agents in Los Angeles and arraigned in Los Angeles federal court on Wednesday. Hoxie was released on $50,000 bail and ordered to a hearing in New York on June 3. Sebbag was deemed a flight risk and was detained. He will be transported to New York.

Prosecutors said Hoxie and Sebbag kicked off their effort by sending cold emails to hedge funds, many of whom then went straight to federal authorities.

In an undercover dragnet, agents contacted Sebbag, who in one email said he learned Disney was in talks to sell ABC, a long-standing subject of speculation on Wall Street.

"Bob Iger is in serious and advanced negotiations with two private equity firms to sell them the ABC network but no price has been determined yet," Sebbag wrote in the email, according to the criminal complaint.

Disney responded: "The reference in the complaint to conversations regarding the ABC Network were and are false."