Ex-Lazard Banker Convicted of Insider Dealing, Imposed Suspended Sentence in Germany

A former Lazard Ltd. banker was convicted of insider dealing after he was accused of helping an accomplice make millions from illicit trades. 

The ex-banker -- who can only be identified as D.R. -- worked at the lender's merger unit in Frankfurt and had access to in-house opinions on deals in the works. German judges handed him a suspended sentence on Friday. 

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The two men bet that shares of targets in the deals would rise once those opinions became public. The transactions include the takeover bid by Carlyle Group Inc. and Bain Capital for Osram Licht AG in 2018 and KKR & Co.'s investment offer to Axel Springer SE, according to the court.

D.R.'s co-defendant, who can only be identified as M.R., was sentenced to three years and eight months in jail, according to the ruling handed down by the Frankfurt Regional Court on Friday. He acted with "considerable criminal energy" and also duped the ex-Lazard banker, Presiding Judge Daniel Trosch said after delivering the verdict on Friday. 

M.R.'s lawyer, said he will appeal the verdict. The defendant has strongly fought the allegation during trial and and has said that he made the profits only by using his skill in reading the markets. He accused D.R., who had cooperated with prosecutors, of lying. 

The ex-Lazard banker's attorney, Leonie Linke, said her client took the right decision to cooperate and help the probe. "My client's strategy worked out," she said after the verdict.

The ex-banker gave the inside information to his co-defendant who generated trade gains of 8.5 million euros ($9.7 million). The court ruled they would seize 6.7 million euros from M.R. and 119,000 euros from D.R.

With his action, D.R. "has thrown away a career as an investment banker," Judge Trosch said. "But later he did everything right: with his confession, he barely avoided a prison term." Without that cooperation, the ex-banker would have landed in prison, he said.

Both men met at a vacation in Turkey in 2016. M.R., who was an experienced investor, tried to talk D.R. into sharing the information. While the banker initially declined to do so, he later changes his mind and started to deliver information, according to the court.

German financial regulator Bafin said M.R.'s sentence is the longest prison term ever handed down in a German insider trading case. 

The regulator alerted prosecutors to the issues in three complaints filed in 2019 and 2020, the agency said in a statement on its website.

Source: Bloomberg