For at least a year an insider from Russian oil company Tatneft and his unemployed friend made money by putting Tatneft shares on the market, cashing them in and then returning them to their rightful owners. The whole scheme was made possible because the insider had access to private databases and could manipulate software to carry out operations with the shares. Experts at InfoWatch point out that this is a perfect example of why big business needs to take the problem of insiders much more seriously.
The case of a software engineer at Russian oil company Tatneft and his unemployed accomplice has ended up in court. Both are accused of hi-tech fraud. According to prosecutors, the insider made use of his position to steal 110,000 shares in OAO Tatneft worth approximately $200,000 between January and June 2005, Gazeta.Ru reports.
According to investigators, the insider’s friend first suggested the idea of using other people’s shares to trade on the stock market. He asked the Tatneft employee, who had access to the relevant databases, to help. In early 2005 four other acquaintances were asked to open personal accounts where the insider “downloaded” the illegally-acquired shares, while making a minor alteration to the program for online trading. In all, 100 shares were removed from 1,100 private individuals.
Three more accomplices were later brought into the scheme whose task it was to arrange all the necessary agreements and accounts so that a “financial corridor” was ready in advance for the sale of the shares. The money made from the stock market was transferred to a bank account before being withdrawn almost immediately and passed on to the ringleader. The insider then returned the shares to their real owners using a specially adapted computer program.
The scheme was uncovered by chance when one of the affected shareholders requested data on his account. When the system revealed a minus sum the legal holder informed the authorities who then checked all of Tatneft’s shareholder databases. Hi-tech crime specialists discovered 79,600 more Tatneft shares on the market than there should have been.
The insider admitted his part in the affair, though his unemployed accomplice denies any part. The group faces fraud charges that carry sentences of 5-10 years, as well as up to three years and a fine of 50,000 rubles (approximately $1,900) for the creation, use and distribution of malicious computer programs. Tatneft’s share registrar could also bring a civil case against the group for material damages after the company had to buy back all the shares that had not been returned to their rightful owners. During the investigation the price of the company’s shares more than doubled, causing substantial losses.
“Large businesses need to take insiders much more seriously. In this case Tatneft and the share registrar were easily outwitted and it was lucky that the insider didn’t have a different aim. For example, Tatneft’s share price could have tumbled if too many shares had appeared on the market. Of course, it wouldn’t have brought much profit, but the oil giant would have faced serious problems,” says Denis Zenkin, marketing director at InfoWatch.
Source: Gazeta.Ru
