BOSTON - New York-based proxy solicitation firm Georgeson LLC has entered into a deferred prosecution agreement and agreed to pay a $4.5 million criminal penalty to resolve the government’s criminal investigation into a conspiracy to bribe an employee of a proxy advisory firm as part of a scheme to defraud the advisory firm of confidential information about how its clients had voted on numerous shareholder proposals.
According to admissions made in the resolution documents, from September 2007 to March 2012, Georgeson, one of the nation’s leading proxy solicitation firms, conspired to provide tickets to concerts and sporting events to Brian M. Bennett, formerly known as Brian Zentmyer, an employee of one of the country’s leading proxy advisory firms, in order to obtain information about whether and how the proxy advisory firm’s clients had voted on particular shareholder proposals. Georgeson also admitted that its employees conspired to defraud Georgeson’s own clients by billing them for at least a portion of the cost of the bribes provided to Bennett, while falsely describing those charges in invoices as legitimate expenses.
Proxy advisory firms provide institutional investors with research, analysis and recommendations concerning proposals subject to vote by shareholders in publicly traded companies. The firms may also engage in ancillary businesses, such as helping clients cast their votes, also known as proxy ballots or proxies. Proxy solicitation firms, in turn, assist publicly traded companies in matters requiring shareholder approval by attempting to gather information about institutional investors’ holdings and the direction of their proxy votes. This information can help proxy solicitors and their clients determine whether particular shareholder proposals are likely to pass or fail, and can thus help to shape their strategies for affecting the outcome of shareholder votes.
In July 2015, Bennett pleaded guilty to an Information charging him with one count of conspiracy to commit wire fraud and honest services wire fraud. He was sentenced in January 2017 to one year of probation. In December 2016, Keith Haynes, a former senior managing director at Georgeson, pleaded guilty to an Information charging him with one count of conspiracy to commit wire fraud and honest services wire fraud. He has not yet been sentenced. Four other Georgeson employees have been charged in an indictment with conspiracy to commit wire fraud and honest services wire fraud, as well as substantive counts of wire fraud and honest services wire fraud. They are scheduled to stand trial in February 2018 in federal court in Boston. The details contained in the indictment against those individuals are allegations. They are presumed innocent unless and until proven guilty beyond a reasonable doubt in a court of law.
As part of the deferred prosecution agreement, Georgeson has agreed to pay the criminal penalty, to continue to cooperate with the U.S. Attorney’s Office in the District of Massachusetts in any ongoing investigations and prosecutions relating to the conduct, including of individuals, to enhance its compliance program and to retain an independent compliance consultant.
Acting United States Attorney William D. Weinreb and Harold H. Shaw, Special Agent in Charge of the Federal Bureau of Investigation, Boston Field Division, made the announcement today. The United States Attorney’s Office received valuable assistance from the Securities & Exchange Commission. Assistant U.S. Attorney Stephen E. Frank, Chief of Weinreb’s Economic Crimes Unit, and Assistant U.S. Attorney Eric D. Rosen, also of the Economic Crimes Unit, are prosecuting the case.
Source: U.S. Department of Justice, Office of the United States Attorneys
