Bloomberg News

Broker Gets Two Years Probation for Insider-Trading Scheme

July 27, 2011

(Updates with judge’s comments in third paragraph.)

July 27 (Bloomberg) -- A Philadelphia-based broker-dealer who pleaded guilty and agreed to cooperate with the U.S. against two ex-boyfriends was sentenced to two years of probation by a judge who urged her to turn her life around.

Donna Murdoch, 49, of Philadelphia, a managing director of Keystone Equities Group LP, pleaded guilty in December 2008 to 15 counts of securities fraud, one count of obstructing justice and a charge that she lied to federal authorities. Each count of securities fraud carried a prison term of as long as 20 years.

“I am placing a lot of faith in what you have just told me,” U.S. District Judge Miriam Cedarbaum in Manhattan said today as she imposed her sentence. “I hope that you really intend to turn your life around.”

The judge said later, “I certainly hope that you meant what you say because you are not a youngster and you have quite a history.”

Assistant U.S. Attorney Jonathan Streeter said in court papers that Murdoch provided the government “substantial assistance” as the “central witness” at the trial of an ex- boyfriend, James Gansman, a former partner at Ernst & Young LLP who was convicted of insider trading in February 2010.

‘Model’ Witness

While Murdoch originally lied to federal prosecutors and agents when they first questioned her about her trades, she eventually agreed to tell the truth about her crimes, he said.

“Once she made a break from that conduct, she became a model cooperating witness,” Streeter said. Without Murdoch, the U.S. wouldn’t have been able to make a case against former Keystone Equities Chairman Richard Hansen, who later pleaded guilty to conspiracy and insider trading charges, Streeter said.

When Cedarbaum said she didn’t intend to impose a prison sentence, Murdoch began to weep.

“I still feel the decision to cooperate was the right one, given the situation,” Murdoch told Cedarbaum. “I know how hard I fell down.”

She said later, “I will carry the shame of all my wrongdoings for the rest of my life. I almost lost everything.”

Cedarbaum directed Murdoch to serve six months of her probationary term confined to her home. The judge also ordered her to perform 300 hours of community service and forfeit more than $392,000 that she earned as a result of her crimes.

AMD Deal

Prosecutors said Gansman tipped Murdoch about seven merger- and-acquisition transactions involving Ernst & Young clients, generating illegal profits of more than $300,000. They said in court papers that he provided the information to her “because of their close and personal relationship,” knowing she would buy and sell securities.

Gansman was convicted of tipping Murdoch about transactions involving Freescale Semiconductor Inc., Spectralink Corp. and K2 Inc., as well as Advanced Micro Devices Inc.’s acquisition of ATI Technologies Inc. in 2006 and others in which she bought options after learning of pending deals.

The case was part of a U.S. crackdown on insider trading by federal prosecutors that included Galleon Group LLC co-founder Raj Rajaratnam, who was convicted in May in a case that also involved inside trades on the same AMD transaction in 2006.

Since Rajaratnam was charged in October 2009, at least 49 people have been charged with insider trading and 46 have been convicted in federal court in Manhattan.

Prosecutors also have won convictions of former employees at firms including Bear Stearns Cos., Morgan Stanley, UBS AG and Lehman Brothers Holdings Inc.

The case is U.S. v. Murdoch, 08-cr-00471, 08-cv-04918, U.S. District Court, Southern District of New York (Manhattan).

--With assistance from David Glovin in New York. Editors: Michael Hytha, Peter Blumberg

To contact the reporter on this story: Patricia Hurtado in Manhattan federal court at

To contact the editor responsible for this story: Michael Hytha at

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