Fund manager sentenced for Citizens trading

BOSTON – A former hedge fund manager was sentenced to a year and a day in federal prison earlier this month in a five-year-old insider trading case related to Citizens Financial Group Inc.’s $10.5 billion acquisition of Charter One Financial Inc. in 2005.
Michael Tom, 40, of Winchester, Mass., had been charged in 2005 with five counts of insider trading. Tom allegedly reaped $750,000 in profit from the trades.
Until December 2003, Tom had been a senior analyst at a Citizens unit that examined banks that the banks wanted to buy, Reuters said. He left to manage Global Time Capital Growth Fund, a hedge fund he partially owned.
Prosecutors said Shengnan Wang, a Citizens analyst who replaced him and an investor in the hedge fund, told Tom 2004 that Citizens was preparing to buy a Cleveland-based bank.
After narrowing down the possible acquisition targets, Tom purchased stock and options in Charter One over the next three business days, prosecutors said.
On May 4, 2004, Citizens announced it intended to acquire Charter One. The bank’s share prices rose 22 percent the next day, and Tom sold nearly all his holdings, netting $750,000, according to the U.S. Attorney’s office.
Wang and her husband, Hai Lu, pleaded guilty to insider trading charges in the matter on Nov. 4, 2005, according to news reports. They were each sentenced a year later to one year of probation and 500 hours of community service.
In May, Tom agreed to pay more than $1 million to settle a civil case with the U.S. Securities and Exchange Commission related to the same charges, news reports said.