Disney Employee Accused in Foiled Stock Plot

By ETHAN SMITH And JOHN R. EMSHWILLER

Federal authorities alleged Wednesday that a Walt Disney Co. executive assistant and her boyfriend engaged in a ham-handed plot to sell Wall Street traders inside information, first offered in a chirpy missive sent to dozens of investment companies.

"Hi, I have access to Disney's (DIS) quarterly earnings report before its release on 05/03/10," the March 5 letter began. "I am willing to share this information for a fee that we can determine later."

The alleged plan went awry. Instead of taking the bait, "multiple hedge funds reported the illicit scheme," the Securities and Exchange Commission said in a press release.

In a pair of complaints filed Wednesday, federal authorities said the letter and subsequent emails were sent by Yonni Sebbag, whose girlfriend Bonnie Hoxie was an assistant to Disney's head of corporate communications.

Disney said in a statement Wednesday that it "has been fully cooperating with this investigation." Ms. Hoxie was at work as recently as Tuesday, according to people at the company.

A federal judge ordered Mr. Sebbag held as a potential flight risk and released Ms. Hoxie on a $50,000 bond Wednesday. Neither responded to the charges in a bail hearing Wednesday.

The March 5 form letter was sent to 33 investment companies, according to a criminal complaint filed by the U.S. Attorney's office in Manhattan federal court charging the two with conspiracy and wire fraud. Undercover agents from the Federal Bureau of Investigation began corresponding with Mr. Sebbag, who used the pseudonym "Jonathan Cyrus" in the email exchanges, according to the complaint.

As the earnings release approached, Mr. Sebbag, 29 years old, and Ms. Hoxie, 33, engaged in an awkward exchange of their own as they waited with growing frustration for the quarterly earnings data to materialize, according to transcripts in both complaints. The exchange at points took on the tone of any couple bickering over mundane issues like bill paying.

"Get things moving with all the powers you have," Mr. Sebbag urged his girlfriend at one point.

"Thanks for the flattery," Ms. Hoxie replied. "I wish you could come to work every day with me."

On the day of the earnings release, Ms. Hoxie sent Mr. Sebbag an email stating "here is the bag that you are going to get for me," the SEC said in a companion civil complaint filed in New York federal court. It said the email included a link to "a picture of an expensive Stella McCartney designer handbag available for $700 at Neiman Marcus."

Mr. Sebbag allegedly replied that he would get her the bag "next week" and added, "I may be able to (buy) u 2 of them." To which she purportedly emailed back, "In that case, I also love love these shoes," and attached a link to a photo of Stella McCartney shoes at Neiman.

On May 22, a "Bj Hoxie," who appeared to be the same Bonnie Hoxie, posted a Facebook update that said, "I go shopping shopping shopping!!"

Wednesday's arrests resulted from a far more straightforward and streamlined investigation than other recent high-profile crackdowns on insider trading, which have involved months of meticulous sleuthing to piece together the illicit flow of information.

In this case, the alleged peddlers simply put their offer in writing and sent it out so widely that word of the scheme was bound to reach authorities.

The criminal complaint alleges that at one point Mr. Sebbag attempted to sweeten the pot by offering a supposed tidbit: that Disney was in advanced talks to sell its ABC television network to a pair of private-equity firms. Disney in a statement said any such claims "were and are false."

In communications with FBI undercover agents, who were posing as interested stock traders, Mr. Sebbag "stated that he was looking to build a business relationship" and "was able and willing to provide them non-public information on a regular basis in the future," the SEC complaint said. He also "made clear" that he wanted to be paid for the information, "understood his conduct carried 'risks,' and that he wanted to avoid getting caught," the complaint added. In one email he allegedly said, "I was thinking $20000 is a fair compensation but you are free to make an offer."

At a May 14 meeting in New York with undercover agents, Mr. Sebbag "lifted the veil of his alias" and provided his identity, said the SEC complaint.

He also allegedly admitted that he didn't work for Disney but that his girlfriend was a secretary to a high-ranking Disney employee. He said he was sharing some of the money with her, according to the complaint.

At that May 14 meeting, the complaint said, Mr. Sebbag also asked the undercover agents "for their advice on how to open up an off-shore account in order to deposit the proceeds of the scheme so as to avoid notice by enforcement authorities." He stated, the complaint added, that "he didn't 'want to go to jail.'" He said he would go to Israel to open an account there, according to the complaint. He allegedly agreed that future discussions with his supposed confederates would be done via prepaid cell phones that "would be regularly switched to make detection of the scheme more difficult."

The complaint said he left the meeting with $15,000 cash in an envelope. Meanwhile, the U.S. Attorney's office said the "investigation is continuing."

Write to Ethan Smith at ethan.smith@wsj.com


From the Complaint: Read the Letter

Hi, I have access to Disney's (DIS) quarterly earnings report before its release on 05/03/10 [sic]. I am willing to share this information for a fee that we can determine later. I am sorry but I can't disclose my identity for confidentiality reasons but we can correspond by email if you would like to discuss it. My email is eilatcap@gmail.com. I count on your discretion as you can count on mine. Thank you and I look forward to talking to you.
Email Exchanges: Mounting Tension

Emails between Ms. Hoxie and Mr. Sebbag reveal mounting frustration at the delay in obtaining the earnings report. On May 11, Ms. Hoxie emailed Mr. Sebbag: "I told you that you were going to be waiting . . . ."
Mr. Sebbag responded "Just hurry up," to which Ms. Hoxie replied "I have no control over this. Patience is a virtue."
Still waiting for the information later that day, Mr. Sebbag urged Ms. Hoxie to "Get things moving with all the powers you have." Ms. Hoxie replied "3 hours have come and gone what is another hour at this point. Chill."

In a further effort to calm Mr. Sebbag, Ms. Hoxie asked in another email sent on May 11: "What would you suggest I do. If I could wave my magic wand and give you what you want – I would. However, since that is not going to happen I suggest you call on you inner Buddhist – and CHILL the f' out."
Anticipating the Spoils

On the same day that Ms. Hoxie provided Mr. Sebbag with Disney's confidential EPS information – and Mr. Sebbag tipped the Putative Trader [an FBI agent] – Ms. Hoxie sent Mr. Sebbag an email laying claim to a share of the unlawful profits they expected to derive from the tip. Ms. Hoxie stated "here is the bag that you are going to get for me – thank [sic]," and attached a link to a picture of an expensive Stella McCartney designer handbag available for $700 at Neiman Marcus, an upscale department store. Mr. Sebbag replied that he would get Ms. Hoxie the bag "next week." Anticipating that they would receive substantial compensation from the Putative Traders, Mr. Sebbag stated "I may be able to [buy] u 2 of them, lol." Ms. Hoxie responded via email, "In that case, i also love love these shoes" and attached a link to a picture of expensive Stella McCartney shoes also sold at Neiman Marcus.