Because stock trading is full of opportunities for traders to take advantage of their positions, the law takes accusations of fraud very seriously, but it works the other way, too. Traders have to work hard to protect their reputations because their livelihood depends on it. As a result, stock traders tend to react quickly if they’re ever accused of insider trading or any other forms of fraud.
According to a recent defamation lawsuit, Allstate allegedly falsely accused four traders of illegally taking advantage of their insider trading knowledge by intentionally timing trades in such a way that would inflate their own bonuses. Daniel Rivera, the managing director of Allstate’s equity division, along with three senior portfolio managers, were the four employees accused and fired as a direct result of those accusations.
In October 2009, Allstate announced the work of its equity division would be outsourced to Goldman Sachs. In December of that same year, it fired Rivera and his three senior portfolio managers (Kensinger, Meacock, and Scheuneman) for allegedly violating Allstate’s code of ethics. Because the four employees were supposedly fired with cause, they were not eligible for severance pay. The timing is certainly suspicious, but if Allstate did this as an to save money and avoid paying four senior employees their severance packages, the plan, if this was the plan, a fact which Allstate surely denies, then the plan backfired. Continue reading