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July 9 — Former Carter's Inc. executives Eric Martin and Richard Posey, and former hedge fund portfolio manager Mark Megalli were handed prison terms July 8 ranging from one year to two years regarding their alleged roles in a multi-year, multi-million dollar insider trading conspiracy involving the children's clothier's stock .
Martin, a former Carter's vice president who allegedly tipped a Wall Street analyst—Cooperator Number 1—to confidential earnings information during a six-year period, was sentenced to two years in prison followed by three years of supervised release. He also was ordered to pay $950,000 in restitution and to perform 80 hours of community service.
Martin pleaded guilty in late 2012, according to a U.S. Attorney's Office release.
Posey, meanwhile, allegedly continued to provide Martin with inside information about Carter's financials after Martin separated from the company in 2009. Posey pleaded guilty a little more than a year ago. He will serve 15 months in prison followed by three years of supervised release and pay restitution in the amount of $750,000, according to prosecutors.
Megalli, a portfolio manager at New York hedge fund Level Global Investors LP, was charged with causing the hedge fund to execute multimillion dollar traders in Carter's stock based on tips he received from Martin from September 2009 through July 2010.
He pleaded guilty in late 2013, and was sentenced by U.S. District Court for the Northern District of Georgia Judge Richard Story to a year and a day in prison followed by three years of supervised release. Megalli also was ordered to pay $50,000 in restitution and to perform 100 hours of community service, the U.S. Attorney's Office announced.
In the release, U.S. Attorney Sally Quillian Yates said the sentences imposed on the three men “send a strong message to company insiders and investment industry professionals in this district and elsewhere that they are required to follow the same rules that govern regular investors, and that the consequences for failing to do so can be severe.”
Martin's illegal trading and tipping between 2005 and 2010 resulted in more than $7 million in insider trading gains and losses avoided for Martin and his downstream tippees. Posey's illegal trading and tipping of Martin between 2009 and 2010 resulted in more than $5 million in insider trading gains and losses avoided. Megalli's illegal trading between 2009 and 2010 resulted in more than $3 million in insider trading gains and losses avoided for Level Global, prosecutors recapped.
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