The men were told that they earned too much money to qualify for free lawyers.
SPRINGFIELD - An East Longmeadow man and his nephew are under federal indictment for an alleged insider-trading scam that reaped $600,000 in profits, with one of the defendants telling securities watchdogs a stock tip came from his late sister who appeared to him in a dream, according to the charges.
Peter E. Talbot, 42, and his nephew, Carl E. Binette, 29, of Ludlow, appeared in U.S. District Court on Tuesday to answer securities fraud, conspiracy and other charges.
The men appeared without attorneys because they said they had too many bills to afford private ones, and hoped a federal magistrate judge would assign them taxpayer-financed lawyers.
After some discussion, U.S. District Magistrate Judge Kenneth P. Neiman said they earned too much money to qualify for free lawyers, but told Talbot he may consider charging them $2,000 a month for subsidized appointed attorneys.
“Could you see your way to $1,500?” Talbot asked.
“We’re negotiating now?” Neiman responded, adding that he would go no lower than $1,800 monthly considering Talbot makes about $70,000 annually as a utilities financial specialist for the state of Connecticut.
A former assistant vice president for the Hartford Investment Management Company, a subsidiary of the Hartford Financial Services Group, Talbot is accused of tapping into confidential company files and tipping his nephew to a potential acquisition of a Seattle-based insurance firm.
However, Liberty Mutual, not the Hartford Group, ultimately bought Safeco Corp. in 2008. The purchase yielded a $616,000 profit for the defendants, who had stockpiled Safeco options and common stock through an on-line brokerage account in Binette’s name, according to the charges.
A spokesman for Liberty Mutual said that company and the Hartford are not affiliated. An official at the Hartford confirmed that Talbot no longer works there but could not comment further on the case.
When the acquisition of Safeco became public on April 23, 2008, the defendants dumped all of their shares the same day, investigators say; the stock value had leapt more than $20.
The indictment states that Talbot called Binette eight days earlier to tell him that Safeco would be a good investment and was a potential acquisition target for the Hartford. Witnesses told investigators that Talbot accessed confidential analyses of Safeco on the Hartford’s network drive.
Binette, a financial manager at a car sales company in Palmer, immediately began borrowing money from his bosses and relatives to bankroll his new, very targeted passion for the stock market, the charges state. Prosecutors argue that Talbot schooled Binette in the market and made some of the buys himself, though never at work.
Confronted by U.S. Securities and Exchange Commission investigators in May of 2008, Binette attempted to rebuff their suspicions. According to the indictment, he said his interest in Safeco was piqued by buzz in Internet chat rooms “as well as a dream he had in which a deceased relative told him she was ‘safe.’”
Binette also is charged with obstruction of justice.
Assistant U.S. Attorney Vassili Thomadakis told Neiman that Talbot, a father of three, faces more than six years in federal prison if convicted. Binette faces more than four years, Vassili said.
Both men declined comment outside the courtroom after the hearing. However, they vehemently deny any wrongdoing in court filings related to a civil action by the SEC, which was closed before the men were indicted.
A lawyer for Talbot argues it wasn’t even Talbot’s former employer that purchased Safeco. Binette, arguing in his own defense, said he was assured that he was acting legally.
Neither was arraigned because of their contentions that they are too deeply in debt to hire lawyers. Talbot said he was unemployed for nearly a year after the SEC launched its investigation - which cost him $60,000 in legal fees - and his family was forced to apply for Food Stamps and move in with his in-laws.
Also a father of three, Binette said that when the investigation became public earlier this year, his bosses demoted him from a salaried position to a commission-based job and he, too, is struggling financially.
Talbot asked Neiman about the possibility of defending himself “pro se,” which Neiman said he would strongly advise against.
“Are there any motions to file?” Talbot asked.
The judge told the pair to mull their financial pictures and return to court for arraignments on Dec. 13.