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Tuesday, January 18, 2011

Christie's Insider Trading?

Did New Jersey Governor Chris Christie recently break the laws on insider trading?
 
Christie recently warned that rising health care costs might bankrupt the State of New Jersey. Within minutes, the size of two planned bond offerings was reduced by about half, suggesting a sharp drop in investor demand.

Now there's circumstantial evidence to suggest a possible avenue for illicit, illegal benefit: the job Christie's wife, Mary Pat, holds as a bond trader at the noted bond firm Cantor Fitzgerald.  Through that job, Mary Pat Christie may have access to price information for municipal bonds, the same type which suffered that deep price cut after her husband's scaremongering about New Jersey's impending bankruptcy.  Also, it is entirely plausible that Mary Pat knew about her husband's impending speech, and surmising the contents and the likely market reaction, could have been in a position as First Lady of the State to receive confidential information, and become a "tipper" through her Cantor Fitzgerald firm, or otherwise. 

The fact pattern brought to mind a prominent 2003 criminal prosecution of a former Goldman, Sachs Vice President (and financial news commentator) John Youngdahl for insider trading in U.S. Government Treasury bonds. Youngdahl ended up pleading guilty.

There is no evidence to suggest anything illicit has occurred, only disparate facts which show a possible avenue for communications (written or verbal) which could constitute insider trading.  In other words, if insider trading had occurred, these facts simply illustrate how one theory (among many) could be plausible.
These facts may not prove anything illegal, but they point to the appearance of impropriety and, just as disturbingly, the indifference to that appearance. 

This is a continuation of the theme of hubris demonstrated in the recent press conference where Governor Christie defended his absolutely indefensible decision to remain at DisneyWorld after the recent blizzard (this after taking off for the flight from Newark as the storm was already striking the state), and the Michele Brown loan.  It makes one question the basic organizational judgment of the Governor''s staff.  

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