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Tag: james spertus

  • US Accuses Famed Short-Seller Andrew Left of Securities Fraud

    US Accuses Famed Short-Seller Andrew Left of Securities Fraud

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    (Bloomberg) — US authorities accused famed short-seller Andrew Left of committing fraud through stock trades, social media posts and research reports — their biggest move yet in a yearslong crackdown against traders who tout their bearish bets.

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    The Securities and Exchange Commission alleged Friday that Left used his firm, Citron, to generate about $20 million in profits from illegal trading involving almost two dozen companies. The Justice Department also announced a criminal case against Left, accusing him of securities fraud and allegedly lying to investigators about compensation from hedge funds.

    The cases against Left stem from a wide-ranging US effort to examine relationships between hedge funds and skeptical researchers. The probes have rattled the industry for three years as investigators have sought information on dozens of money managers and activists, as well as transactions involving more than 50 stocks.

    According to the SEC, Left would use social media or television appearances to make recommendations about a stock, on which he had short or long positions, sometimes giving a target price at which he thought the stock would trade. The Justice Department said Left would create a false perception that his public comments on a stock were in line with his trading activity.

    “Left knowingly exploited his ability to move stock prices by targeting stocks popular with retail investors and posting recommendations on social media to manipulate the market and make fast, easy money,” the Justice Department said in its statement.

    James Spertus, a lawyer for Left, said in an email that the government’s case was “defective” and his client had no duty to disclose his personal trading intentions. Spertus said that the information Left published was “truthful information” which is needed for markets to be efficient.

    “The DOJ and the SEC threaten the integrity of the securities markets and put the health of our financial system at risk by trying to silence a publisher of truthful information who also trades in the securities he writes about,” said Spertus.

    Stock Trades

    Left, according to prosecutors, would also quickly close positions after releasing a research report or making comments. That would let him take advantage of short-term price movements.

    According to the SEC, Left’s misconduct touched stocks including Tesla Inc., Roku Inc., American Airlines Group Inc. and Nvidia Corp.

    “This fraudulent practice deceived investors and allowed Left to use his Citron Research reports and tweets as catalysts from which he could derive short-term profits,” the SEC alleged in the complaint.

    The mere appearance of research from a prominent bear can send a stock into a tailspin before the market has time to debate its merit — which can be especially hard on small investors who can’t react quickly. Companies and shareholders have increasingly cried foul, prompting US congressional hearings.

    Left profited from his advance knowledge that he was about to trigger movements in the market, according to the Justice Department indictment. For the his strategy to work, Left knew that investors needed to believe that the recommendations and positions he set forth were sincerely maintained, and not just vehicles for him to personally profit, prosecutors said.

    ‘Candy From a Baby’

    The SEC alleges Left bragged to colleagues that some of his statements caused retail investors to trade the way he wanted them to and that it was like taking “candy from a baby.”

    The SEC’s lawsuit documents dozens of social media posts, reports and comments from Left from March 2018 through December 2020.

    Left was charged in an indictment in federal court in California with one count of engaging in a securities fraud scheme, 17 counts of securities fraud and making false statements to federal investigators. If convicted, he could face more than 25 years in prison.

    Prosecutors claim that Left lied to law enforcement by stating that his firm never exchanged compensation with a hedge fund. US authorities allege Left received more than $1 million from two hedge funds.

    –With assistance from Katherine Burton.

    (Updates with Left lawyer’s comment in sixth and seventh paragraphs.)

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    ©2024 Bloomberg L.P.

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  • Top advisor to Los Angeles D.A. Gascón is charged with illegal use of confidential police records

    Top advisor to Los Angeles D.A. Gascón is charged with illegal use of confidential police records

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    California’s attorney general filed criminal charges Wednesday against one of L.A. County Dist. Atty. George Gascón’s top advisors, who supervises high-profile and sensitive cases including police misconduct, fraud and public corruption.

    Atty. Gen. Rob Bonta announced the 11 felony counts against Assistant Dist. Atty. Diana Teran in a press statement. He accused her of improperly downloading confidential records of police officers in 2018 while she was working for the L.A. County Sheriff’s Department. Teran then “impermissibly used that data” after joining Gascón’s office three years later, Bonta said.

    The confidential records concern 11 sheriff’s deputies, according to a criminal complaint filed in L.A. Superior Court. The deputies’ names were not included in the court filing.

    The announcement of criminal charges against one of Gascón’s top advisors — particularly one so closely tied to his agenda of law enforcement accountability and criminal justice reform — sent shock waves across the state’s legal community and was expected to have a far-reaching impact on active and future criminal cases handled by Gascón’s office, while also fueling fresh controversy as he pursues reelection this year.

    “No one is above the law,” said Bonta, a fellow Democrat and police reform advocate, in a statement issued by his press office. “Public officials are called to serve the people and the State of California with integrity and honesty. At the California Department of Justice, we will continue to fight for the people of California and hold those who break the law accountable.”

    Teran referred questions to her attorney, James Spertus, who called the case “dead on arrival” and said he was stunned to see the charges, since his client had been cooperating with a criminal investigation into the allegations.

    “They’re charging her for doing something within the scope of her employment, that she has a duty to do,” Spertus said in an interview Wednesday.

    Teran, who has been a lawyer for more than 35 years, worked for years as a deputy district attorney in L.A. County before assuming posts involving law enforcement monitoring and oversight. In 2018, she served as a constitutional policing advisor to the Sheriff’s Department, then as a consultant to the Office of Inspector General, which provides oversight to the department. In 2019, she became a law enforcement accountability advisor with the L.A. County public defender’s office.

    After Gascón’s election victory, Teran joined his administration in early 2021 as a special advisor and later began running the Justice System Integrity Division, or JSID, which handles prosecutions of police and attorney misconduct. Her hiring was one of many criticized by longtime prosecutors frustrated by Gascón’s willingness to empower attorneys who had previously done defense work.

    Gascón recently promoted Teran to assistant district attorney, giving her supervisory authority over units that prosecute organized crime, white collar crime and corruption, as well as crimes by law enforcement and attorneys.

    Teran’s current employment status is unclear, and a spokesperson for Gascón’s office declined to specify whether she remains an assistant district attorney.

    The criminal complaint offers little detail about the underlying allegations. A source familiar with the case who was not authorized to speak on the record said the charges related to documents that Teran had downloaded while she worked at the Sheriff’s Department and were subsequently provided to the discovery unit at the D.A.’s office.

    Spertus said that the investigation into his client was sparked by a complaint from former Sheriff Alex Villanueva, who routinely clashed with those who attempted to provide oversight of his department, including Teran. In a livestream Wednesday evening, Villanueva echoed that, saying that in 2019 he alerted the FBI and the attorney general to concerns about Teran downloading information he described as a “massive data breach.”

    Though the complaint does not spell out what data Teran may have illegally misused, Spertus said he believed state prosecutors were erroneously trying to charge Teran for uploading public documents to the district attorney’s “Brady List.”

    Under the 1963 U.S. Supreme Court decision in Brady vs. Maryland, prosecutors must turn over evidence favorable to defendants, which could include information that undermines a police officer’s credibility or reveals past dishonesty or wrongdoing. The Brady List refers to a database of law enforcement officers who have been accused or convicted of on-duty misconduct.

    Spertus believed the documents and data in question were either obtained through public court files or involved findings of dishonesty against sheriff’s deputies, which would be public record under Senate Bill 1421, California’s landmark police transparency law.

    That law, which makes information about serious uses of force, allegations of sexual assault or dishonesty by California police officers a public record, did not go into effect until Jan. 1, 2019. Teran is alleged to have obtained the information in question in 2018.

    “It’s unsustainable on its face,” Spertus said of the allegation. “You don’t need permission to use public information. They can’t say that she wrongfully took anything,” he said, adding, “She had documents in her possession. She had an obligation to her employer to build out the Brady database.”

    In a statement to The Times, Villanueva called the charges against Teran “a vindication of my administration” and credited state prosecutors with uncovering “the truth.”

    “Many more public corruption cases involving Los Angeles County elected leaders and their appointees are being investigated by Mr. Bonta’s office, and based on what I know of the evidence, I expect further indictments,” Villanueva added.

    Gascón did not directly address the charges against Teran, but in a statement he defended his office’s handling of confidential law enforcement records.

    “When I took office, we developed a protocol that ensured we complied with our constitutional obligations under Brady — which requires us to turn over potentially exculpatory evidence to the defense, a category that includes law enforcement’s prior misconduct — while simultaneously complying with state and federal law around privacy. I stand by that protocol,” Gascón said Wednesday.

    Gascón emphasized that the case would not deter him from carrying out his agenda.

    “I remain committed to upholding transparency and ensuring police accountability within Los Angeles County,” he said in the statement.

    Gascón’s opponent in the district attorney’s race, Nathan Hochman, pounced on the charges.

    “This is just the latest example of Gascón’s demonstrated record of poor judgment and lack of leadership in running the district attorney’s office,” Hochman said in a written response. “Promoting Teran to Assistant District Attorney, ironically in charge of ethics and integrity, even occurred despite legitimate objections from many experienced prosecutors.”

    This is not the first time Teran has been publicly accused of misconduct while in Gascón’s employ.

    Late last year, the former second in command of the JSID unit filed a civil suit alleging that Teran ordered prosecutors to delay announcing the decision not to charge a sheriff’s deputy in a high-profile excessive-force case because of how it might affect the reelection bid of then-Sheriff Villanueva.

    Richard Pippin, president of the Assn. of Los Angeles Deputy Sheriffs, the union that represents rank-and-file sheriff’s deputies, called for a broader investigation into the “deeply troubling” allegations.

    “During her tenure with the sheriff’s department, Diana Teran’s contempt for the people who strive to keep our communities safe was apparent, and so we weren’t surprised to see District Attorney George Gascón place her in a position as one of his top advisors,” Pippin said in a statement Wednesday. “ALADS is demanding a complete investigation of all matters, access to sensitive records and other actions taken by Diana Teran and her staff during her entire tenure. This investigation should not be limited in scope or effort.”

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    James Queally, Keri Blakinger, Matt Hamilton

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