An assistant to Walt Disney Co. communications chief Zenia Mucha was arrested by federal agents in Los Angeles Wednesday, accused of a scheme to exchange insider information on the media giant in exchange for cash to buy, among other things, expensive shoes.
According to several reports, Bonnie Jean Hoxie, an administrative assistant at Disney, and her boyfriend Yonni Sebbag attempted to sell information in Disney's second quarter earnings report before its official release to the public. The two were charged with conspiracy and wire fraud and face up to 25 years in prison if convicted.
In a statement, Disney said it was cooperating fully with the investigation.
The Securities and Exchange Commission also filed a separate civil suit against the pair on Wednesday, alleging insider trading. The suit did not mention Mucha, nor was the Disney executive accused of any wrongdoing.
According to the SEC suit, Sebbag began contacting about 20 hedge funds in March, claiming that he had advanced information regarding Disney's fiscal second quarter earnings report and that he would disclose that data for a price. He also indicated that he was privy to other insider information and would like to establish a long-term business relationship with the funds. According to the SEC, the hedge funds immediately contacted the FBI, which set up a sting operation to ensnare Sebbag.
After a lengthy exchange of e-mails, Sebbag, who was using the alias Jonathan Cyrus, agreed to accept $15,000 for the insider information from one undercover agent and a 50-50 split of trading profits from another.
Sebbag had promised to send the undercover agents an advanced copy of Disney's earnings report two to three hours in advance of their public disclosure on May 11. While he was not able to do that, he was able to send a 107-page document outlining talking points for the scheduled earnings call two days in advance and later disclosed the media giant's earnings per share for the period (48 cents) before they were made public.
According to the SEC suit, on the same day that Hoxie provided Sebbag with the earnings information, she sent him an e-mail "laying claim to a share of the unlawful profits they expected to derive from the tip." One such e-mail included a photo of a $700 Stella McCartney handbag that Sebbag was to buy her. He replied that he may be able to get two with the profits from the sale.
"In that case, I also love love these shoes," Hoxie replied, attaching a photo of expensive Stella McCartney shoes, the suit stated.
Sebbag also allegedly told undercover agents that Disney CEO Robert Iger was in intense discussions with several private equity funds about selling its ABC broadcast network. Rumors that Disney would sell the broadcaster have swirled for months. The reference to ABC in the complaint, "were and are false," Disney said in a statement.
"Today's arrests of Disney insider Bonnie Hoxie and her alleged accomplice Yonni Sebbag suggest that the integrity of the securities exchanges can be compromised not only by top executives, but also by anyone entrusted with material, non-public information," U.S. Attorney Preet Bharara said in a statement. "This office, along with the FBI and the Securities and Exchange Commission, is committed to identifying and prosecuting all individuals - on whatever rung of the corporate ladder -- whose greed motivates them to betray their employer's trust and corrupt the market."
