* Greed is not the only motive for insider traders
* Personal relationships key to seeking and giving tips
* Companies should firm up policies, communications
Insider traders may have taken the greed-is-good mantra to heart, but it's not the only thing that motivates them.
People may be spurred to leak or misuse confidential information for many reasons: the thrill of risky behavior, financial or work pressures, ignorance about what constitutes insider trading, even the idea that you can get away with it.
People who have millions and millions of dollars (can be) motivated just by being in the game and the adrenalin rush it provides, said Blake Coppotelli, a former prosecutor who now works at Kroll's business intelligence and investigations unit. And sometimes, there is no rhyme or reason.
The week before last, regulators charged six people, including billionaire Galleon Group co-founder Raj Rajaratnam, for netting a profit of more than $20 million from trading in the stocks of Google Inc (GOOG.O), Sun Microsystems Inc (JAVA.O) and others.
And to underline how much focus prosecutors are putting on the problem, a Canadian man pleaded guilty on Tuesday to U.S. and Canadian criminal charges stemming from a 14-year insider trading scheme involving as many as 40 pending corporate deals. He did so a day after his alleged accomplice, a Canadian lawyer, apparently committed suicide. As with most insider trading schemes, greed may have been the main motive. But in the Galleon case it appears that senior executives at top companies such as IBM and Intel were passing on tips simply because they were friends with hedge fund managers.
Passing on information, whether it is a tip about an impending merger or quarterly earnings, is one of the easiest things to do, insider trading experts said. That could be why insider trading is especially pernicious. Since 1994, the Securities and Exchange Commission has taken action in roughly 800 insider trading cases.
It's the easiest white-collar crime to make money off, said Utpal Bhattacharya, a professor of finance at Indiana University's Kelley School of Business. The only cost is the cost of getting caught.
Insider trading -- where people trade in public company stocks based on information obtained before it is made public
-- is both a criminal and civil offense and is punishable by -- is both a criminal and civil offense and is punishable by fines and imprisonment.
ARROGANCE AND IGNORANCE
Bhattacharya, who has studied insider trading cases, recently coauthored a paper, Do They Do it for the Money, in which he explores the motives that drive people to pass on tips or trade on it. A sense of psychological hubris drives many insider traders to act the way they do, because they think they can get away with it, he said.