For more than six months, federal prosecutors say, a New York man used inside information to make illegal profits in the stock market—and a core element of his alleged scheme was his interaction with Bloomberg News, which published several stories shortly after the trader arranged to make significant purchases of the companies’ shares.
Last month, a federal grand jury indicted Jason Peltz on multiple counts of securities fraud, money laundering, tax evasion and lying to the FBI. Peltz, 38, is accused of working with over a half-dozen unnamed and unindicted co-conspirators to learn about impending takeovers and other market-moving news, and to move money between accounts as a way to hide his role and profits.
The indictment notes that Peltz’s moves were timed closely to stories that ran at “a financial news organization.” While the newsroom isn’t named, federal officials cite five stories and their timestamps— all of which match precisely to pieces that ran on Bloomberg News’ website. Each of those stories had shared bylines, but only one reporter is identified as an author for all of the articles: Ed Hammond, who worked at the Financial Times before coming to Bloomberg more than six years ago to cover mergers and acquisitions. In 2017, Hammond was named Bloomberg’s senior deals reporter in New York — a highly prestigious post in that newsroom.
The feds allege that Peltz used disposable “burner” phones and encrypted apps to communicate with a journalist, and that the reporter provided “material nonpublic information about forthcoming articles” which Peltz used to trade in the market “just prior to publication of an article about each company written by the reporter.” The indictment describes “numerous contacts” between Peltz and a reporter, including at least one in-person meeting.
Neither Hammond nor Bloomberg is named in the indictment; the filing says a financial-news reporter’s identity was made known to the grand jury that heard the case. No one at Bloomberg is accused by prosecutors of wrongdoing or of being aware that these stories might be linked to an insider-trading scheme. Prosecutors make no allegation that the stories contained any inaccurate information, nor do any of the stories display corrections.
Bloomberg is looking into the matter, according to a person familiar with the issue. A company spokesperson said, “Ed Hammond is a very accomplished reporter. We’re not aware of any facts to suggest any wrongdoing on his part.” Hammond declined to comment for this story. Also declining to comment: Jeremy Temkin, who is Peltz’s lawyer; and a spokesman for the US Attorney’s Office’s Eastern District in New York. Details of the case were reported earlier today by The Washington Post.
Covering the mergers and acquisitions beat has always been a delicate dance. Journalists who write about corporate deals are privy to some of the most sensitive information in financial markets. Skilled reporters often learn in advance that deals are under consideration, or that they’ve fallen apart. Such information can generate huge swings in stock prices, with millions of dollars in the balance. Federal laws generally prohibit corporate officers and directors from trading on non-public facts that they learned in the boardroom.
At Bloomberg, scoops about deals are highly valued, because beating competitors like Reuters or Dow Jones helps to justify the high price of a terminal, which carries rich veins of data along with news, at a reported cost of around $24,000 a year. The terminals constitute the company’s core business. At the same time, Bloomberg, like most newsrooms, cautions its journalists to be careful about how they handle such information, and strictly forbids them from using tips for their own accounts. The company’s in-house manual, The Bloomberg Way, states that “journalists may not discuss or distribute nonpublic, market-moving information outside of the scope of newsgathering. … Sometimes we may have to disclose nonpublic and potentially market-moving information to a person from whom we seek comments or verification. Be prudent in sharing and avoid being specific on the timing of publication.”
At the time of the alleged insider trades, according to the indictment, Peltz was a principal at an unnamed financial-services firm, and also chief executive of a company producing a music-based mobile-computing app. Peltz was close to many of the co-conspirators, prosecutors say: He attended the wedding in the British Virgin Islands of one—a director of Ferro Corp., an Ohio chemical firm. Another is identified as a relative. Most of them live in New York City or its suburbs, though one is based in Dubai.
The first public hint of the Peltz investigation came in December, when the Securities and Exchange Commission alleged that an unnamed person who served on the board of Ferro, or that person’s fiancee, had leaked him information in February 2016—namely, that a private-equity firm might be interested in taking over the company. Peltz bought Ferro stock via others’ accounts, culminating with his last purchase at 9:37 am on March 15, 2016, according to the indictment.
Around six or seven minutes after that final purchase, Bloomberg posted a scoop by Hammond and another Bloomberg reporter under the headline, “Ferro Said to Have Received Takeover Approach From Apollo,” a major private-equity firm. The stock shot up 18 percent on the news, according to the indictment. An account linked to Peltz quickly sold 150,000 shares of the stock—“less than a minute after the report was released,” according to the prosecution. By the time the sales finished, Peltz and his associates had allegedly made around $1 million in what the SEC termed “illicit profits.”
Over the next six months, prosecutors say, Peltz and his colleagues made other lucrative stock purchases, several of which occurred shortly before Bloomberg News published exclusive stories:
- In late March 2016, accounts linked to Peltz bought stock in Medivation, a California-based biopharmaceutical company. The final purchase occurred around 2:30 pm on March 30, and in less than two hours, Bloomberg published a story about the company trying to fend off a takeover attempt. “Minutes later,” the indictment states, the accounts “began selling off their entire equity positions in Medivation stock.”
- The next month, Peltz-linked accounts bought shares in INC Research Holdings, a North Carolina medical-testing firm. Some of those purchases took place on April 18, 2016, shortly before 1:10 pm, when three Bloomberg reporters ran a story about a possible deal with Labcorp. “At or about 1:11 p.m. that day,” prosecutors said, Peltz’s accounts “began selling off their entire positions in INC Research Holdings stock” — around the same time that the stock soared 16 percent on the news.
- Similar stock purchases occurred less than an hour before Bloomberg published a July 2016 story about a possible merger between Xerox Corp. and R.R. Donnelley and Sons; and two days before a September 2016 article about a possible sale of Community Health Systems Inc., prosecutors allege.
Federal officials have charged only Peltz. The SEC said the case originated from its Analysis and Detection Center, which seeks out suspicious patterns, especially with traders who possess unusually good timing, or with the shares of companies that are about to announce market-moving news.
(Note: The author was an executive editor at Bloomberg from 2014 to 2016 and co-wrote the latest version of The Bloomberg Way. He does not recall meeting or working with Hammond, and had no role in the stories noted here. Also, John Micklethwait, editor in chief of Bloomberg News, is on CJR’s Board of Overseers.)
Bill Grueskin is on the faculty at Columbia Journalism School. He has previously worked as founding editor of a newspaper on the Standing Rock Sioux Indian Reservation, city editor of the Miami Herald, deputy managing editor of the Wall Street Journal, and an executive editor at Bloomberg News. He is a graduate of Stanford University (Classics) and Johns Hopkins’s School of Advanced International Studies (US Foreign Policy and International Economics).