Mark Megalli pleaded guilty on Thursday to one criminal count of conspiracy to commit securities fraud in connection with a “multimillion-dollar insider trading conspiracy” in the stock of children's clothing company Carter's Inc., according to a news release from the Justice Department.
Mr. Megalli was a portfolio manager in the consumer stock sector for hedge fund manager Level Global Investors, which closed in 2011.
The case was brought by Sally Quillian Yates, the U.S. attorney for northern Georgia, in U.S. District Court in Atlanta. “Rigging the system by trading on inside information undermines the public's confidence in our financial system and it's a violation of the law,” Ms. Yates said in the release.
Mr. Megalli also was charged with civil insider trader violations by the SEC in the same court on Thursday. That case is ongoing.
In the plea agreement for his criminal case, Mr. Megalli admitted buying, selling and shorting Carter's stock in 2009 and 2010 based on insider information given to him by Eric M. Martin that resulted in Level Global taking gains and avoiding losses.
Mr. Martin was Carter's former vice president of investor relations and a paid consultant to Level Global, said the Justice Department's release.
Richard T. Posey, Carter's former vice president of operations, provided some of the tips Mr. Martin passed to Mr. Megalli, according to the release. Messrs. Posey and Martin remained in contact after the latter left Carter's to set up his own consulting firm in March 2009, according to the release.
Mr. Martin and Mr. Posey were indicted separately on criminal charges in connection with the insider trading and each pleaded guilty in 2012 to the charge of conspiracy to commit securities fraud.
Sentencing hearings for Messrs. Megalli, Martin and Posey have not been scheduled.