A Walt Disney Co employee and her boyfriend have been charged with trying to sell insider information to over 30 hedge funds, including a tip Disney was in advanced talks to sell its struggling ABC television network -- which Disney said was false.
Disney said it is fully cooperating with the investigation. The reference in the complaint to conversations regarding the ABC Network were and are false, the company said in a statement.
An assistant to the company's head of corporate communications gave confidential information about Disney's quarterly earnings to her boyfriend, who in turn tried to sell it to U.S. and European hedge funds, according to criminal and civil insider trading charges filed on Wednesday.
Bonnie Hoxie and her friend, Yonni Sebbag -- otherwise known as Jonathan Cyrus -- were arrested by FBI agents in Los Angeles, law enforcement officials said.
In a sting operation, undercover agents contacted Sebbag, who in one email said he had learned that the company was in discussions to sell ABC -- on which Wall Street had speculated but which the company has never confirmed.
Shares of Disney were up 3.5 percent to $33.46 in afternoon trading. Analysts said the shares had risen earlier on the claims regarding ABC rather than being hurt by the charging of an employee.
It's a total embarrassment for Disney, but it can happen to any company. But what's far more interesting from the share value perspective is if they are selling ABC, said Alan Gould, an analyst with Soleil Research.
A statement by the Manhattan U.S. Attorney said that from March 2010 through May 25, 2010, Hoxie was employed as a secretary to Disney's head of corporate communications.
In this capacity, Hoxie obtained material, nonpublic information, including Disney's quarterly earnings statements.
Then, in violation of her duties of trust and confidence, Hoxie disclosed the inside information to Sebbag, who in turn disclosed the inside information to outside investors for the purpose of trading in advance of the official public announcement of Disney's earnings, the statement said.
According to court documents, an undercover FBI agent who identified himself as a hedge fund trader began communicating with Sebbag on March 11. On March 15, Sebbag wrote that Disney's chief executive was in advanced talks to sell ABC.
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 court document.
The U.S. Securities and Exchange Commission filed related civil charges. Its complaint said Sebbag was Hoxie's boyfriend. It said they sent anonymous letters to U.S. and European hedge funds, offering a pre-release of Disney second quarter 2010 results in exchange for a fee.
The criminal complaint filed in Manhattan federal court in New York charged Hoxie, 33, and Sebbag, 29, with conspiracy and wire fraud in allegations of illegal insider trading. The charges carry a maximum possible sentence of 20 years' imprisonment should they be found guilty.
The case is USA v Bonnie Hoxie et al, U.S. District Court for the Southern District of New York No. 10-mag-1113.
They are scheduled to make an initial appearance before a judge in Los Angeles later on Wednesday.
(Reporting by Lisa Baertlein in Los Angeles and Grant McCool in New York; Editing by Gerald E. McCormick and Edwin Chan)