Jewelry Store Owner Pleads Guilty in Insider Trading Case Involving Agoura Hills Business Partner

An Encino jewelry store owner pleaded guilty Monday to federal charges of receiving insider information from a former KPMG senior partner and using the tips about such Southland companies as Herbalife and Skechers USA to make illegal stock trades that generated over $1.2 million in illicit profits.

Bryan Shaw, 52, of Lake Sherwood entered the plea to one felony conspiracy count before U.S. District Judge George H. Wu, who set Sept. 16 for sentencing. In a plea agreement filed previously, Shaw admitted that he plotted with Scott London to commit securities fraud.

"Guilty, your honor,'' Shaw responded when Wu asked for his plea. The judge allowed the defendant to remain free on bond pending sentencing.

As part of a companion case brought by the Securities and Exchange Commission, Shaw has agreed to give up more than $1.2 million in illegal stock trading profits, according to defense attorney Nathan J. Hochman.

Shaw admitted in court papers to having conspired with London to violate federal securities laws by using insider information to make illegal stock transactions in publicly traded companies. When asked by Wu if he was indeed guilty of the offense, Shaw responded, "Yes, your honor.''

London, 50, of Agoura Hills was charged last month with one count of conspiracy to commit securities fraud and is scheduled to be arraigned May 30. He was arrested by federal authorities on April 5 and fired the same day by KPMG.

The federal investigation led to a temporary halt in trading of Herbalife and Skechers USA shares on April 9.

"These two men were close friends who shared dinners, concerts, sporting events and secret information that brought profits to each of them,'' U.S. Attorney Andre Birotte Jr. said previously. "London provided, and Shaw was all too happy to use, proprietary information that should have remained confidential. These men broke ethical rules and criminal laws for the sole purpose of lining their pockets with illegal profits.''

Documents filed in the case against Shaw, as well as the 24-page affidavit in support of the criminal complaint in London's case, outline how London provided Shaw with confidential information about KPMG clients, and how Shaw used that information to make trades that generated the illegal proceeds.

London was a senior partner at KPMG who supervised hundreds of accounting professionals at the firm and personally handled audits for major KPMG clients, including Herbalife Ltd. and Skechers USA Inc. As a result of his position, London had access to confidential information about KPMG's clients before that information was disclosed to the public, according to federal prosecutors.

Shaw began to cooperate with the government's investigation in February. London's criminal conduct continued until March, when he was recorded in telephone conversations passing highly sensitive and confidential information to Shaw regarding upcoming earnings announcements for KPMG clients Herbalife and Irvine-based Deckers Outdoor Corp., federal prosecutors allege.

During the course of the scheme, London, in some instances, called Shaw two to three days before news releases were issued for KPMG clients and read confidential information from the draft releases to Shaw, court documents allege.

Prosecutors allege London also revealed to Shaw confidential information about impending mergers concerning KPMG clients before that information was made public. At times, London even discussed with Shaw how to structure Shaw's purchases of the stock in certain companies in order to protect them from being discovered, according to the U.S. Attorney's Office.

According to Shaw's plea agreement, he gave London more than $60,000 in cash in exchange for confidential information about KPMG's clients, typically meeting with London near Shaw's jewelry store to give him bags containing stacks of $100 bills.

Shaw also acknowledged giving London a $12,000 Rolex Daytona Cosmograph watch, as well as jewelry and concert tickets, in exchange for the confidential information, according to prosecutors.

-- City News Service