Former SEC Enforcement Director Steve Cutler once told a meeting of the DC Bar Association that “no matter how bad the underlying conduct, you can always make things worse.” At the time Mr. Cutler was talking about failing to produce documents in a Commission investigation. His remarks also apply to Peter Talbot and Carl Binette.

Mr. Talbot at one time was employed by the Hartford Investment Management Company. In April of 2008, his company was engaged in confidential acquisition talks with Safeco Corporation. Mr. Talbot learned about the discussions during his employment. He subsequently told his nephew Carl Binette. Both men opened a brokerage account in Mr. Binette’s name. Safeco common stock and options were bought. Safeco was later acquired not by Hartford, but Liberty Mutual. Trading profits of $615,833 were made. Both men were named as defendants in SEC enforcement actions and later settled (here).

Not every insider trading case brought by the SEC becomes a criminal prosecution. This one did. Uncle and nephew were recently named as defendants in a seven-count indictment. U.S. v. Talbot, No. 3:10-cr-30036 (D. Mass.). The indictment contains counts of conspiracy and securities fraud.

Not every insider trading case involves conduct which can be charged as obstruction of justice. This one did. Mr. Binette is charged with obstruction of justice for making false statements to the SEC during its investigation of the insider trading scheme. Mr. Binette apparently made the bad day of having to face a civil SEC investigation worse – now the charges are criminal.