U.S. charges ex-Wells Fargo employees with insider trading

By Sarah N. Lynch

WASHINGTON (Reuters) - U.S. regulators on Monday charged two former Wells Fargo employees with insider trading, saying a former research analyst tipped a trader about pending rating changes for six healthcare stocks.

The Securities and Exchange Commission said former analyst Gregory Bolan Jr, 37, tipped former trader Joseph Ruggieri, 35, about the upcoming upgrades and downgrades in ratings. Ruggieri made more than $117,000 in profits, the agency said.

The SEC said Bolan also tipped another close friend about the ratings changes, letting the friend reap $10,000. The friend has since died.

The two ex-employees plan to contest the charges in the SEC's administrative court.

Sam Lieberman, an attorney with Sadis & Goldberg LLP, said Bolan and Ruggieri "vehemently deny" the charges and that the SEC's decision to bring the case in its in-house court instead of a federal court raises questions about its case.

"The SEC knows that it has serious weaknesses in its case, and that is why it is choosing to bring this as an administrative proceeding instead of trying this case in a federal court," he said.

He also contested some facts in the SEC complaint, saying Ruggieri did not reap $117,000. It was a proprietary account for the bank and not his client's personal account, he said.

Monday's case marks at least the third time the SEC has charged former Wells Fargo employees with insider trading in recent years.

Last week, Wells Fargo was fined by the SEC and admitted it had faulty control procedures in connection with a different employee in the Wells Fargo Advisors LLC unit who has been charged in criminal and civil proceedings with insider trading in Burger King securities before a 2010 buyout.

A Wells Fargo spokeswoman said Wells Fargo Securities immediately reported the concerns in this case to the SEC in 2011, is "not a party to the matter" and cooperated during the probe.

According to the SEC complaint, Ruggieri was fired from Wells Fargo in 2011, and Bolan resigned after both were questioned by compliance personnel about communications involving nonpublic information.

The SEC said that between April 2010 and March 2011, Bolan published eight ratings changes, and Ruggieri traded ahead for six, either by selling stock short or purchasing stock depending on whether an upgrade or downgrade was coming.

The stocks he allegedly traded were Parexel International Corp, Covance Inc, Albany Molecular Research Inc, AthenaHealth Inc, Emdeon Inc, which is now part of Blackstone, and Bruker Corp.

The SEC said Bolan is now working for Sterne Agee Group in Nashville, Tennessee, and Ruggieri is employed by International Strategy & Investment Group PLC out of Raleigh, North Carolina.

The compliance officer at ISI declined to comment. Todd Decker, chief marketing officer at Sterne Agee Group, said the firm believes that Bolan is "innocent until proven otherwise."

(Reporting by Sarah N. Lynch; additional reporting by Peter Rudegeair in New York; Editing by Jim Loney and David Gregorio)