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Kevin Heron warned his colleagues about the dangers of insider trading, but he apparently didn't think those warnings applied to himself. On July 19 a Philadelphia jury convicted Heron, the former general counsel of Amkor Technology Inc., of using nonpublic information while buying and selling shares in his company and another business. He now faces a sentence of at least five years in prison and a potential fine of up to $20 million.

Jurors found that Heron traded in advance of confidential Amkor news, including adverse earnings reports and a joint venture that the company planned with International Business Machines Corp. Prosecutors said that Heron made almost $290,000 over the course of more than 50 trades in Amkor stock from October 2003 to June 2004.

And he thought he could get away with it, according to the government. "How is anyone to know if you sell 1000 shares?" Heron wrote in an e-mail to a friend cited by prosecutors. "I mean think about it, the market trades over a billion shares a day, who gives a rats [sic] ass if you sell 1000."

Heron's defense attorney, Joseph Aronica of Duane Morris, says that the nonpublic information his client knew wasn't as important as the government claims. "It wasn't material, and he didn't trade on it," Aronica says.

At press time U.S. District Judge Stewart Dalzell of the Eastern District of Pennsylvania was considering a defense motion for acquittal or a new trial. If Heron loses, he'll be sentenced Jan. 28. The 49-year-old attorney faces a maximum of 20 years on each of four counts, though advisory guidelines suggest that he's more likely to get a total sentence of 63 months to 78 months. Prosecutors will seek forfeiture of Heron's trading profits, but they could also demand a steep fine.

Amkor officials declined to discuss the case. "It's a pending litigation matter, so we're not in a position to comment," says general counsel Gil Tily. A former partner at Dechert, Tily took the helm of the company's legal department last June, three months after Heron was fired.

Amkor hired Heron as its general counsel in 1994 after he responded to a newspaper ad. One of the largest semiconductor manufacturers in the world, the company had revenues of $2.7 billion in 2006. Though Amkor is based in Chandler, Ariz., Heron worked in its West Chester, Pa., office.

When Amkor went public on the Nasdaq in 1994, it placed Heron in charge of insider trading compliance. Prior to quarterly earnings reports or major announcements, Heron would set blackout periods during which he had to approve any Amkor stock trades by its employees.

According to the government, Heron began swapping insider information in 2003 with his neighbor, Stephen Sands, a part-time salesman for Neoware Inc., a small computer hardware company based in King of Prussia, Pa. Heron told Sands about an unannounced deal between Amkor and IBM. Sands returned the favor by telling Heron that Neoware was negotiating a distribution deal with CVS/Caremark Corp. and was expecting a good quarter. (Neoware was acquired last October by Hewlett-Packard Co.)

Aronica contends that this was innocent talk among friends. "It was two buddies cheerleading each other and their companies," he says. But in March, Sands pleaded guilty to one count of conspiracy. (His lawyer, Thomas Gallagher at Pepper Hamilton, didn't respond to requests for comment.)

In addition to trading on the Neoware information from Sands, the government says that Heron also began trading on nonpublic Amkor news. The GC sold stock and exercised options when his employer expected its share price to drop. And Heron realized almost $130,000 through a series of stock sales anticipating Amkor's 2003 acquisition of Unitive Inc. According to prosecutors, Amkor knew that it was paying too much for the company and would be criticized in the market.

Heron maintains that he was simply diversifying his holdings so they wouldn't be dominated by Amkor. "You like to spread out your portfolio, spread out the risk," Heron told SEC investigators in his deposition.

The Securities and Exchange Commission started looking into trading of Amkor shares in June 2004 after the IBM and Unitive deals. According to government filings, the SEC at first interviewed Heron in his role as general counsel, not because he was a suspect. But when investigators asked if he ever made trades in Amkor, he said no. The GC's answer contradicted trading evidence that the SEC had collected, which led to more probing questions.

While his lawyers at Duane Morris and Berkowitz Klein argue that Heron is innocent, they apparently wish that someone else would take up his defense. Last April, six months before Heron was schedule to go to trial, both firms asked the court to let them withdraw from his case.

Duane Morris claimed that it was never supposed to be Heron's counsel at trial, only during the SEC investigation and plea negotiations. But Berkowitz Klein, a two-lawyer firm based in New York, bluntly said that it was worried it wouldn't get paid in the future.

While Amkor agreed in February 2006 that it would advance Heron's legal fees, the company stipulated that its obligation would cease if he was convicted. Without Amkor, Heron's financial situation would be bleak, Berkowitz Klein contended. Heron faced other money problems -- the government wanted to seize his house, and his wife was divorcing him and seeking child support for their three children. Dalzell denied the firms' requests, writing that if they dropped out of the case, it would signal to other attorneys the case was a sinkhole.

However, that ruling only extends to the criminal proceedings against Heron. In September, when Heron filed to stay the SEC's case against him, he did it pro se. It may be his last act as a lawyer for a while.

UPDATE: On December 19, federal district judge Stewart Dalzell acquitted Kevin Heron on all but one charge. The judge ruled that the "jury convicted Heron on the basis of information that was immaterial." Dalzell said that the jury "very likely" would have still concluded Heron was guilty for insider trading regarding the remaining count.

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