Slashdot Mirror
FBI Databases Used for Stock Fraud
Phronesis writes "The Associated Press reports that two FBI agents have been indicted for conspiring with the owner of InsideTruth.com to short stocks and then leak information from the FBI's internal databases (e.g., unpleasant personal information about corporate officers). They also allegedly blackmailed companies with the threat of revealing such information. This case illustrates the failure of law enforcement agencies to implement adequate protection against the abuse of information they collect."
In this case, the FBI had a legitimate reason for having the data. The abused persons were under active FBI investigations at the time. As stated above, the agents would borrow shares of a small company when they knew that one of the principals of the company was under investigation. They'd sell the shares, leak the bad secrets, wait for the share price to fall, buy them back, return them to the original owners, and pocket the difference. It's certainly abuse, but in this particular case the FBI as a whole had good reason to have the data.
Virg
Actually, they were leaking information about ongoing investigations to affect stock prices. The way they'd do this is to borrow stocks in companies whose principal(s) were under investigation, sell the stock, leak the data, wait for the stock price to fall, buy back the shares, return them to the original owners, and pocket the rest. So, in answer to your question, the "who"s that wouldn't want this:
1.) The individuals under investigation. Remember, they are innocent until proven guilty, and more than half of people investigated by the FBI are exonerated, so the reputation damage done by the leak may not be deserved.
2.) The stockholders, both the ones from whom the stocks were borrowed and other stockholders whose investments are getting trounced by these leaks. Remember, more than half of these investigations do not result in charges.
3.) Others who are also being investigated by the FBI. What assurance do they have that they won't be the next targets of this?
4.) The stock market in general, which takes a very dim view of insider trading of any kind, since it undermines faith in the system, which is key to its survival.
That ought to be enough to start with. The thing to remember in this is that they were not just leaking data about past offenses, they were leaking the fact that they're under investigation currently.
Virg