The former president of an accounting firm used by Howard Stern pleaded guilty Monday to charges of insider trading in shares of Sirius Satellite Radio Inc. before the announcement of the shock jock's move to the network.
Gary D. Herwitz, 50, formerly of Mahoney Cohen & Co., faces up to 16 months in prison at his sentencing on March 17.
"My trading in Sirius was wrong," Herwitz told a judge during a hearing in federal court in Brooklyn.
Afterward, Herwitz ducked out of court through a side door without speaking to reporters. His attorney, Marjorie Peerce, said her client "deeply regrets what happened and he looks forward to getting on with his life."
The scheme unfolded after Stern sought financial advice from the Manhattan firm's chief executive — his personal accountant for the previous 19 years — about making a move to Sirius once his contract with Infinity Broadcasting Corp. expired, court papers said. Infinity is part of Viacom Inc., as is CBSNews.com.
On Sept. 21, 2004, the CEO told Herwitz that Sirius had made Stern an offer. He also reminded the defendant to keep the pending deal confidential, court papers said.
About a week later, Herwitz violated federal law by buying 25,000 shares of Sirius stock based on nonpublic information, the papers said. Stern announced on Oct. 6 that he had signed a $500 million deal with Sirius to move his show to satellite.
Herwitz, who bought the stock at $3.19 a share on the Nasdaq Stock Market, saw the price jump to $4.29 a share following the announcement, court papers said. Federal authorities said he made about $18,000 in improper profits. Sirius' shares fell 17 cents, or
2.5 percent, to $6.78 Monday afternoon.
"When a professional abuses his position of trust in an effort to make a quick profit, he will be held accountable," U.S. Attorney Roslyn Mauskopf said in a statement.
In a related agreement with the Securities and Exchange Commission, Herwitz and Tracey A. Stanyer, a former vice president at Sirius, both agreed to pay fines for using inside information to profit in the Stern deal.
Herwitz will pay $52,000 and Stanyer agreed to pay $35,000 to settle the SEC's charges. The settlement with Stanyer also bars him from ever serving again as an officer or director of a public company.
Sirius spokesman Jim Collins said the company fired Stanyer in April in connection with the case. "This action involves an individual who is no longer an employee and has nothing to do with the company," Collins said.
Mahoney Cohen released a short statement saying Herwitz had developed a "sterling reputation" during his nearly 25 years at the firm. "We are saddened that an isolated error in judgment has destroyed his brilliant career," the firm said.
By Tom Hays