Ex-Lazard Banker May Dodge Prison in Frankfurt Insider Trading Case

(Bloomberg) -- A former Lazard Ltd. banker who passed confidential information in a nearly $10 million-insider trading case should be spared prison because he admitted responsibility and helped expose the scheme, German prosecutors said.

The ex-banker who can only be identified as D.R. is accused of giving the information to his co-defendant M.R who generated trade gains of 8.5 million euros ($9.8 million). While D.R. should be shown leniency, M.R. should go to prison for 4 years and 10 months, Prosecutor Markus Weimann said in closing arguments at the Frankfurt Regional Court.  

The illicit trades took place between May 2018 and February 2020. D.R., 34, was working at Lazard’s mergers unit in Frankfurt and had access to data about deals the lender provided fairness opinions on. The men bet that shares of targets in the deals would rise once those opinions became public. The transactions at issue include the takeover bid by Carlyle Group Inc. and Bain Capital for Osram Licht AG in 2018 and KKR & Co.’s investment offer to Axel Springer SE.

A German spokeswoman for Lazard said she couldn’t immediately comment.

The two men had met on holiday and M.R., 36, suggested sharing inside information before D.R. initially rejected the idea, Weimann said. Later the ex-Lazard banker changed his mind and contacted M.R. again to follow up, according to the prosecutor. 

M.R. from the start duped D.R. by deviating from the agreed course of action, Weimann alleges. He also kept almost all the profits from the trades and gave D.R. only 126,000 euros, according to the prosecutor. Both men later lost their jobs over the case.

While D.R. eventually admitted to his role in the scheme, M.R. has consistently denied the charges and has said that he made the profits only by using his skill in reading the markets. Weimann rejected that account, saying M.R. on average made a return of more 200% on the investments -- a result impossible to reach by using a legal strategy, according to expert witnesses who testified in the case.

Martin Wiedemann, M.R.’s lawyer, called the prosecutor’s closing argument “absurd,” saying it’s distorting the facts. Wiedemann is scheduled to deliver closing arguments next week Monday.

D.R.’s lawyer Markus Adick said the prosecutor’s closing arguments backed their defense strategy. 

“We did the right thing,” he said.

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