Bingham McCutchen partner Nathan Hochman spoke with  FOX Business Network’s (FBN) Liz Claman about the insider trading case involving his client, Bryan Shaw, and former KPMG senior partner Scott London. Hochman discussed whether he believes Mr. Shaw will go to jail for receiving insider trading tips from London, saying, “We hope it will take into account his cooperation, but to date we have no agreements with either the SEC or the Department of Justice.” Hochman also talked about Shaw receiving information related to Deckers Outdoor Corp (NASDAQ:DECK) and revealed that Shaw “was going to be long Deckers stock” but that he “didn’t go through with the transaction because he was working with the FBI at the time.”

On whether Mr. Bryan Shaw will go to jail:

“The government has made absolutely no commitments on what it intends to do. We hope it will take into account his cooperation, but to date we have no agreements with either the SEC or the Department of Justice.”


On whether Mr. Shaw was going to long or short Deckers Outdoor Corp (NASDAQ:DECK):

“He was going to be long Deckers stock. Actually he didn’t go through with the transaction because he was working with the FBI at the time. But the telephone calls leading up to it were clear that he was going to go long on Deckers stock based on guidance he had received from Mr. London ahead of the guidance being given to the marketplace.”


On the photograph released today showing a monetary transaction between Mr. Shaw and Ex KPMG Partner Mr. London:

“He is handing Mr. London an envelope that has $5000 worth of cash in it. Cash was in exchange for information Mr. London had provided Mr. Shaw concerning the Deckers Outdoor Corp (NASDAQ:DECK) transaction. It was going to be the earnings report dealing with the Deckers transaction in Feb 2013.”


On the relationship between Ex KPMG Partner Mr. London and Mr. Shaw:

“Their relationship started on a golf course several years before in 2010. It started casually enough and over time they became very good personal friends. In about 2010 Mr. London shared with Mr. Shaw non-public material information on a number of stocks that Mr. Shaw traded on. Soon thereafter Mr. Shaw gave Mr. London a portion of the profits that he made.”


On whether it was Mr. Shaw’s Fidelity account that was originally suspended:

“Yes it was. In the summer of 2012, Mr. Shaw found out his Fidelity account had been suspended. Later that year, he got an SEC subpoena. At that moment in time he faced a crossroads because he knew that he had engaged in insider trading with Mr. London. So he could have either concealed and covered up at that time, or he revealed and been responsible. So Mr. Shaw before the SEC began its investigation. Before the Department of Justice or the FBI even knew his name or had him on his radar, voluntarily came forward to the government, fully, completely, and truthfully cooperated with them. And then engaged with the FBI at its direction in an undercover investigation that lead to the tapes that you’ve seen in the criminal complaint.”


On the nature of the Herbalife Ltd. (NYSE:HLF) trades:

“Remember during the undercover, my client wasn’t actually going to make the trades. But the discussion with Mr. London, and Mr. London didn’t know that Mr. Shaw was cooperating with the FBI at the time, was that Mr. Shaw was going to go long on Herbalife based on guidance that was going to be coming out showing that Herbalife Ltd. (NYSE:HLF) was going to beat the Street’s expectations.”


On the motives of Mr. Shaw to engage with Ex KPMG Partner Mr. London in insider trading:

“It was probably less greed than it was stupidity quite honestly at the beginning. He understood he was getting inside information from Mr. London. Mr. London was in a position to provide it. He made initially some small dollars and some small trades. And it just grew overtime. Certainly it became more and more profitable, more and more greedy. His actions were, as he as put it, ‘incredibly stupid and tragic lapses in judgment.’ Which lead him to finally, when the SEC sent him the subpoena, get right with it. Stand up. Take a bold and courageous move without any agreements from the government or the SEC. Come voluntarily forward and go on the record as to what he did fully, completely and truthfully.”


On Mr. Shaw getting information from Ex KPMG Partner  Mr. London on RSC Holdings and Pacific Capital Bancorp:

“My client Mr. Shaw has not traded ever in either one of the two stocks and then got alerted right before the mergers that each one of those companies went through in 2011 and 2012 from Mr. London that those mergers were going to take place. When a merger like that takes place usually the acquired company is going to go up substantially and they had a number of phone calls both before and after the merger in which Mr. Shaw placed significant long bets on each of the acquired companies and made a significant amount of money.”


On how much Mr. Shaw gave Mr. London:

“Well between cash, jewelry and concert tickets and meals it was an excess of $100,000.”


On how much Mr. Shaw made on the trades:

“It was over $1 million.”


On how the SEC caught Mr. Shaw:

“We don’t know what exactly tipped the SEC off and in many cases the SEC sends out subpoenas hoping that they’ll get some information and a lot of times they don’t. In this case immediately after getting the SEC subpoena, Mr. Shaw contacted my council, myself, and in some ways made a bold and courageous decision before any investigation had occurred, that he would go right to the government fully and truthfully tell them the entire story. It was an incredibly difficult decision, but Mr. Shaw stepped up, made that decision and engaged in an undercover investigation that led to the criminal complaint you have before you.”


What was it like for Mr. Shaw to wear a wiretap:

“Mr. Shaw had no contact with the criminal justice system. He had never been convicted or arrested of anything so to get in with the FBI and do this is extraordinary difficult for someone, but he understood that was needed to make things right and he stepped up and he did it.”