The Securities and Exchange Commission on Tuesday accused Arnold McClellan and his wife, Annabel McClellan, of masterminding an elaborate, international, years-long insider trading scheme. McClellan spent the last 15 years as a mergers-and-acquisitions tax partner at Deloitte LLP in San Francisco. His British wife once worked at the firm as well.
In court documents filed in United States District Court for the Northern District of California on Tuesday, the SEC alleges that the McClellans fed information on pending deals to relatives in London. Annabel McClellan's sister is married to James Sanders, who has a trading firm there.
A criminal indictment of Annabel McClellan, 38, was also unsealed on Tuesday, and she was arrested in San Francisco, the New York Times' Dealbook blog reported. Arnold McClellan, 51, has not been charged with a crime, and Dealbook quoted his attorney as saying that he would contest the SEC's charges.
Annabel McClellan's attorney, Nanci Clarence of Clarence & Dyer LLP in San Francisco, said that "we intend to fight this in court." She would not discuss why only Annabel McClellan faces criminal charges.
SEC enforcement director Robert S. Khuzami said in a statement that “The McClellans might have thought that they could conceal their illegal scheme by having close relatives make illegal trades offshore. They were wrong.”
The SEC says that the couple netted more than $3 million from "at least seven" allegedly illegal trades from 2006 to 2008, and that their London relatives and other clients of James Sanders' firm netted more than $20 million. The SEC complaint details numerous phone calls and visits of the couples in San Francisco and in London, and the trading activity that allegedly occured after Arnold McClellan undertook an assignment for a client.
For those who knew the McClellans, the SEC's accusations are shocking. "This is the talk of the town right now," said a San Francisco resident who has known the McClellans for years.
According to the acquaintance, who asked to remain anonymous, Arnold is known for his affection for flashy automobiles. "Arnie has a slew of cars, Maseratis, Porsches," the source said. In recent weeks, citing vague legal troubles, the couple had told friends that they were considering moving their family, which includes two school-aged sons, to South Africa.
McClellan provided advice to such clients as Microsoft and Hellman & Friedman LLC. In particular, Hellman & Friedman's acquisitions of Getty Images and Kronos Inc. were named in the SEC suit, as was Microsoft's acquisition of aQuantive. (Warren Hellman, major funder of The Bay Citizen and chairman of its board, is a co-founder of Hellman & Friedman).
The McClellans live in a nearly 6,000 square-foot home in Pacific Heights that they purchased in 2001, according to property records. The couple have been regularly listed as benefactors or attendees at charity galas for such established San Francisco social charities as the Edgewood Center for Children and Families.
Annabel McClellan had once also worked at Deloitte Tax with her husband. In the court filing, the SEC said that Annabel McClellan handed out stock tips as personal favors. "Annabel McClellan tipped others for her own personal benefit, as a gift to a friend or relative, and to confer a benefit on family members," the court filing said.
The Sanders were charged by the Financial Services Authority in Britain on Friday.