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There’s a new generation of insider traders – and the Securities and Exchange Commission is taking notice. On Tuesday, the San Francisco office of the SEC brought charges against two local employees of accounting firm PricewaterhouseCoopers for trading on inside information about pending deals. The SEC complaint alleges that Gregory Raben, 30, a former auditor, and William Borchard, 28, a former senior accounting associate in the firm’s transaction group, used their access to information about clients to allow Raben to buy stock before six acquisitions went through. Local securities and white collar defense lawyers say that insider trading is an area that’s heating up in their practices while last year’s big scandal, stock option backdating, has cooled. “It’s definitely an enforcement priority of the SEC, and they are working more cases and bringing more cases in the area,” said Christopher Steskal, a white collar defense lawyer with Fenwick & West and former assistant U.S. attorney. Lawyers inside the SEC say they’re seeing more insider trading these days from younger people who don’t remember the huge scandals that ensnared high-finance stars like Michael Milken in the late 1980s. “There is a pattern that we have observed of more professionals committing insider trading,” said Michael Dicke, assistant regional director in San Francisco. “A lot of the people involved are relatively young, and they certainly were not working in the industry in the 1980s – some of them were in diapers at the time.” As in this case, the agency is focusing efforts on gatekeepers like accountants and lawyers, according to SEC lawyers and defense lawyers. “They ought to know better, and when they violate the trust of their profession, those are the types of cases the SEC is going to bring,” said Sahil Desai, the staff attorney who investigated the case. PricewaterhouseCoopers brought the case to the attention of the office after suspicions arose around Raben and Borchard. The SEC claims that Borchard, who performed due diligence on M&A deals, started passing tips to Raben in early 2006. Raben traded ahead of six deals, such as when Fremont, Calif.’s Lexar Media Inc. was acquired by the accounting firm’s client Micron Technology Inc. in March 2006. The pair, who worked in the accounting firm’s San Jose and San Francisco offices, agreed to settle with the SEC. Raben will disgorge his trading profits and those of the two acquaintances he tipped, totaling around $24,000. He’ll also pay an equal civil fine. Borchard will pay a $20,000 civil penalty and won’t be allowed to practice as an accountant before the SEC for three years. Raben’s lawyer, Diane de Seve of Nolan Armstrong & Barton in Palo Alto, Calif., did not return phone calls Tuesday afternoon. Neither did San Francisco lawyer Edward Swanson, who is representing Borchard. Fenwick’s Steskal said that about 10 percent of his work is dedicated to insider trading matters, but added that he expects that number to grow. He’s represented companies that, while not implicated, must respond to fairly broad subpoenas from SEC investigators who are trying to find individuals who are leaking inside information, he said. Steskal attributed the rise in insider trading cases to more M&A activity over the last few years as well as a younger generation that doesn’t remember the lessons of the past. He also said that the SEC is interested in hedge funds and private equity funds that do diligence work – gathering lots of internal data about a company they’re considering buying – but end up not acquiring the company. “It creates the potential for abuse,” Steskal said.

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