Goldman Compliance Officer Busted on Insider Trading

A senior compliance analyst at Goldman Sachs has been charged with insider trading by the SEC, which says the man racked up more than $470,000 ill-gotten profits by trading in brokerage accounts held under his parents’ names. 

The man, Jose Luis Casero Sanchez, worked in the control room of Goldman’s offices in Warsaw, Poland, from 2019 until June of this year. In that role Sanchez had access to material, nonpublic information about corporate mergers and other deals Goldman Sachs was involved with, because his compliance duties included — wait for it — policing against insider trading by other Goldman employees. 

The SEC’s complaint against Sanchez paints a decidedly different picture. According to prosecutors, Sanchez misappropriated sensitive information concerning at least 45 mergers, acquisitions, tender offers, and other deals from September 2020 until May 2021, just before he and Goldman parted ways. He then used that intel to trade in four brokerage accounts set up under his parents’ names here in the United States (even though Sanchez is a Spanish national who lives in Poland). 

Sanchez, 35 years old, even tried to keep a low profile by executing only small trades that made modest profits, the SEC said. It didn’t work.

“Despite Sanchez’s alleged efforts to avoid detection… the SEC’s keen analysis stitched together this pattern of suspicious trading and exposed gross violations of duty by a compliance professional who exploited the sensitive information he was hired to protect,” said Joseph Sansone, chief of the SEC’s Market Abuse Unit, in one of the more grandiloquent statements the agency has made recently.

As a compliance analyst, Sanchez had to sign an internal Goldman Sachs policy requiring employees to disclose “covered accounts,” including brokerage accounts controlled by the employee or family members. He also had to pre-clear any trades on those covered accounts with Goldman, including a certification that the employee wasn’t aware of any material, nonpublic information related to the trade. 

Moreover, the SEC says, Sanchez certified at least three times during his tenure at Goldman that he had reviewed and understood the bank’s policies about personal trading and confidential information; and each time he also certified that he didn’t have any covered accounts held outside Goldman that he had to disclose. And he took training courses on his disclosure and trading responsibilities. 

The Insider Trading Scam Itself

The rest of the SEC complaint explains how Sanchez allegedly violated those promises. Prosecutors say his job at Goldman Sachs was to update “the Grey List,” a confidential database of deals that Goldman’s investment bankers were working on. That database was filled with material nonpublic information. Since Sanchez’ job was to keep the Grey List current, he got to see all that confidential data.

Sanchez allegedly took that confidential information and traded in three brokerage accounts under the names of his father, Abellan, and his mother, Gonzalez. It’s unclear whether Sanchez opened those accounts himself or his parents did, although all four accounts were opened in 2020 and 2021, the period when Sanchez did his alleged insider trading.

For example, the SEC says that in fall 2020 Sanchez purchased shares in HD Supply Holdings before it received an offer from Home Depot to be acquired at $56 per share — at 24.5 percent margin, which netted Sanchez $15,550. He also allegedly traded in Cooper Tire & Rubber before its acquisition by Goodyear, which netted Sanchez another $12,730. (The SEC’s complaint includes an appendix listing all Sanchez’s trading activity.)

Goldman Sachs itself is apparently more than happy to be rid of Sanchez. According to an article in the Financial Times, the bank released a statement saying, “We condemn this egregious behaviour and are fully cooperating with the SEC.”

Oddly enough, this is not the first time a compliance officer has been charged with insider trading lately. In 2019 a federal grand jury indicted the former corporate secretary of Apple, Gene Daniel Levoff, for insider trading in the mid-2010s. Last I heard Levoff was still fighting that case in New Jersey.

Just another example proving my main point about compliance officer liability — that most often, prosecutors bring cases against compliance officers because they believe the compliance officer was somehow involved in the misconduct. And so it goes.