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Wireless Executive Gets Sentenced to Prison After BlackBerry Leak

Wireless Executive Gets Sentenced to Prison After BlackBerry Leak

By Reuters | Updated: 16 September 2015 10:21 IST

A former wireless retail executive was sentenced to five months in prison Tuesday for selling confidential industry information to an analyst whose subsequent 2013 report on sales of BlackBerry Ltd's newest smartphone sent the company's stock price down.

James Dunham, 60, was also ordered by U.S. District Judge Douglas Woodlock in Boston to serve five months of home confinement following his prison term and to pay $76,000, after pleading guilty in June to wire fraud.

The sentence was confirmed by the office of U.S. Attorney Carmen Ortiz in Boston and came in the first case spilling out of its investigations into the black market for secret corporate information that exists outside of insider trading.

"We will not hesitate to prosecute individuals who buy and sell confidential corporate information, regardless of whether there is a provable link to insider trading," Ortiz said.

Dunham, a resident of Glastonbury, Connecticut, was the former chief operating officer of Wireless Zone, which operates over 400 franchise Verizon Wireless outlets.

According to prosecutors and court papers, Dunham entered a secret consulting relationship with an analyst at Boston-based financial firm Detwiler Fenton in 2010 to provide wireless industry information in exchange for $2,000 per month.

Prosecutors said the information gave the analyst "real time" insight into what happened at the franchiser's stores and was used for research reports sent to investors.

The scheme came to light in April 2013 after Dunham provided information about a company's new smartphone, prosecutors said.

While not identified in court papers, the manufacturer matched the description of BlackBerry, whose launch of the Z10 smartphone was considered critical to the troubled company.

Prosecutors said after Dunham told the analyst, Jeff Johnston, that returns of the phone exceeded sales at some of the franchiser's stores, Detwiler Fenton issued a report based on that information.

BlackBerry's stock price subsequently fell 7 percent. The company disputed the report as "false" and urged regulators to investigate.

Prosecutors said the information was accurate so far as the franchiser's stores went, though may not have been with respect to overall sales and returns.

Dunham's lawyer declined comment. Johnston, who was not charged, did not respond to requests for comment.

Ortiz's office has continued investigating similar conduct since Dunham's February arrest.

In July, Brian Bennett, an employee at proxy adviser Institutional Shareholder Services Inc pleaded guilty to divulging confidential corporate voting details to a proxy solicitation firm.

The case is U.S. v. Dunham, U.S. District Court, District of Massachusetts, No. 15-cr-10110.

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