Pakistani Banker Charged for Insider Trading Scheme

Bilal Zuberi and Adil Najam

ATP takes pride in highlighting the successes of Pakistanis in many different realms of life, locally and internationally. Just yesterday we all read about the uplifting story of Pakistani entrepreneurs who had reached a succesful climax in their venture by taking their company to a proftable IPO.

But the following news is something that shames all of us Pakistanis. It is indeed the doing of one person but one can see how it reflects badly on all of us Pakistanis. At ATP, our stand is that we are always for Pakistan, which means that when things are wrong we write about them in the spirit of improving them….and highlighting why they should be improved. That said, we also realize that so far the case has not been proven in a court against Mr. Naseem, and until then, he remains just a suspect.
According to the reports (here, here and here):

A Credit Suisse investment banker was charged on Thursday for an insider trading scheme linked to acquisitions involving nine publicly traded U.S. companies that netted a co-conspirator more than $7 million.

Hafiz Muhammad Zubair Naseem, a 37-year-old Pakistani who worked for Credit Suisse’s Global Energy Group in New York, has been charged with one count of conspiracy and 25 counts of securities fraud, prosecutors said in a complaint.

The complaint alleged that between April 2006 and February 2007 Naseem tipped off a co-conspirator about acquisitions involving Northwestern Corporation, Energy Partners, Veritas DGC, Jacuzzi Brands Trammell Crow Co., Hydril Company, Caremark RX, John H. Harland Co., and TXU Corp…

Mr. Naseem, a native of Pakistan who lives in Rye Brook, N.Y., was arrested late yesterday at Credit Suisse offices at Madison Square Park in the Flat Iron District after returning to work from a personal trip to Pakistan, according to people close to the situation.

He was taken to the Federal Bureau of Investigationâ€℠¢s offices in Lower Manhattan, where he emerged, clad in a dark slacks and white shirt, as he was transported to a federal jail in Brooklyn. He is expected to be arraigned today in Federal District Court in Manhattan….

The bank said that it “immediately brought the activities of this employee to the attention of the relevant authorities� and would continue to work with them.

After an inquiry from federal investigators in March, Credit Suisse helped identify Mr. Naseem as someone of interest. Although Mr. Naseem continued to work at the bank, he returned to Pakistan for a visit and did not return until a few days ago.

It appears that Mr. Naseem had a co-conspirator in this scheme whose identity has been withheld. Even though the co-conspirator has been identified as Mr. CC-1, it appears he was also a Pakistani and a banker. There are some leads that suggest that the co-conspirator might be a high ranking official at a financial institution in Pakistan. Forbes has reported that the suspect is being held without bail because given his stronger ties to Pakistan than the United States, there is danger of him fleeing the country.

NASEEM would typically call CC-1 at his home or on CC- 1’s cell phone in advance of a public announcement that a particular Issuer was to be acquired by another entity and he would provide Credit Suisse Inside Information to CC-1 regarding the acquisition in question. Shortly after receiving such a call, CC-1 would purchase securities in that Issuer based on the Credit Suisse Inside Information he received from NASEEM. Following public disclosure that an Issuer was being acquired — which occurred after CC-1 had already purchased securities in that particular Issuer — CC-1 would quickly sell all of the securities he had purchased in advance of the public disclosures. CC-1 executed dozens of securities transactions, including trades in an offshore account, based on Credit Suisse Inside Information; CC-1 profited from his trading in each of the Subject Securities and earned total profits in excess of $7.5 million from the scheme…

Mr. Naseem authorized the Pakistani banker, who is identified in the criminal complaint as “co-conspirator 1� to operate a brokerage account on his behalf, according to the deposition of the Federal Bureau of Investigation agent in charge of the case.

After confirming in an e-mail message that the banker “can do whatever he wants,â€Â? the agent said that Mr. Naseem concluded one message with the comment: “Let the fun begin”…

Naseem is due to appear in Manhattan federal court on Friday. If convicted he faces up to five years in prison for the conspiracy charge and up to 20 years in prison for each of the securities frauds charges.

Obviously, as painful as it is to see such perpetrators being identified as Pakistani nationals in the international press, a report like this does not at all prove that all Pakistanis are frauds, just as the NED story does not prove that all Pakistanis are entrepreneurs. But what it does highlight is the fact that all of us Pakistanis are ambassadors for Pakistan, and that bad actions of a few can ruin everyone’s image. However, the positive thing is, that by the same token, good acts and achievements by a few will also help everyone image. We will continue to hold hope and praise for positive role-models in our midst.