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United States v. Yin

United States District Court, S.D. California

July 6, 2015

UNITED STATES OF AMERICA, Plaintiff,
v.
GARY YIN, Defendant.

ORDER

WILLIAM Q. HAYES, District Judge.

The matter before the Court is the request by the Plaintiff United States of America for an order of restitution to Merrill Lynch in the amount of $3, 881, 001.73 representing losses and prejudgment interest in following three categories: 1) $3, 448.664.21 in third party document control costs, forensic consulting costs, and attorney fees and internal investigation costs; 2) $228, 287.00 for attorney fees paid by Merrill Lynch for representation of Defendant Yin; and 3) $190, 742.91 for compensation paid to Defendant Yin. (ECF No. 54 at 2).

BACKGROUND FACTS

In February of 2013, a federal search warrant was executed at the San Diego branch office of Merrill Lynch, Pierce, Fenner & Smith, Inc. ("Merrill Lynch") and the residence of Defendant Gary Yin by agents of the Federal Bureau of Investigation (FBI). The search warrants authorized a search for evidence relating to insider trading allegations made against Defendant Yin, a Merrill Lynch vice president, and Jing Wang, a client of Yin. Counsel for Defendant Yin was retained by Bank of America (Merrill Lynch)[1], pursuant to an Advancement of Legal Expenses with an Undertaking Agreement signed by Defendant Yin.

To respond to this investigation, and subsequent requests from the Department of Justice ("DOJ") and the Securities and Exchange Commission ("SEC"), Merrill Lynch retained outside professional firms, including the law firm of WilmerHale LLP ("WilmerHale"), the forensic accounting firm of Capital Forensics, Inc., and the document control firm of Huron Consulting Group, Inc. (Declaration of Mark A. Davis, ECF No. 48-2 at 3). The government states the following facts in its "Supplemental Sentencing Document Concerning Merrill Lynch's Claim for Restitution" (ECF No. 54),

During the course of its investigation, the government made (and Merrill Lynch responded to) numerous requests:
1. From the DOJ, Merrill Lynch received a February 15, 2013 DOJ search warrant; three subpoenas, dated February 19, February 27, and March 29, 2013; one fax request, dated March 14, 2014; one formal letter request, dated May 10, 2013; and several informal verbal and email requests.
2. The SEC also sent four separate subpoenas, dated February 27, April 10, May 30, and July 3, 2013, and dozens of informal verbal and email requests under the In re Qualcomm investigation. These subpoenas were separate from the DOJ subpoenas, had largely different scopes, and required different work streams.
3. The government conducted four interviews of Merrill Lynch employees regarding Mr. Yin's and Mr. Wang's conspiracy.

The requests were sweeping in scope, including:

1. A February 19, 2013 DOJ subpoena seeking all documents related to several key accounts and several key transactions over a seven year period from 2006 to 2013.
2. An SEC subpoena seeking all instances in which Mr. Yin traded in the same security on the same day or day after any one of its clients, over a seven year period from 2006 to 2013.[2] For this request, it was not sufficient just to produce documents. Merrill Lynch hired an outside forensic consultant - Capital Forensics Inc. ("Capital Forensics") - that amassed and analyzed tens of thousands of trades by both Mr. Yin and his clients.
3. An extensive email review including broad search terms such as "don't tell" and "jail."
In response to all the subpoenas and other requests, WilmerHale, with the assistance of Huron Consulting Group ("Huron") and Capital Forensics, reviewed over 430, 000 ...

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