Kevin Cassidy, former CEO of Valhalla, NY-based brokerage firm Optionable Inc., pleaded guilty Monday to one count of conspiracy to commit wire fraud in connection with a 2003-2007 commodities trading scandal at Bank of Montreal (BMO).

Cassidy was among the Optionable and BMO employees who were charged by federal and state authorities in 2008 for deceiving and defrauding the bank about the true value of its natural gas options book (see Daily GPI, Nov. 19, 2008). A multi-count indictment charged Cassidy with criminal counts of wire fraud, making false statements to a bank, making false and misleading statements to the Securities and Exchange Commission and securities fraud.

Under terms of the plea agreement, Cassidy would serve 30-37 months in prison. Cassidy also agreed to forfeit illegally obtained profit from the deal and could be fined. He is scheduled to be sentenced Dec. 15 in U.S. District Court for the Southern District of New York.

The indictment accused Cassidy of providing a fake name and Social Security number to conceal his criminal record during negotiations with Atlanta-based IntercontinentalExchange to purchase an interest in Optionable, which operated an electronic trading system. BMO was Optionable’s biggest customer until the bank suffered more than $400 million in trading losses and pulled the plug on doing any more business with Optionable. Cassidy left the company in May 2007, shortly after the trading losses were discovered.

After the scheme was discovered, BMO restated its financial results by reducing net income for the first quarter of its 2007 fiscal year by approximately C$237 million (US$204 million), which reflected a 68% overstatement of BMO’s net income for that quarter (see Daily GPI, May 21, 2007).

In 2009 the Commodity Futures Trading Commission entered into a consent order settling charges brought against David P. Lee, a former trader for BMO, for mismarking and misvaluing of BMO’s natural gas options book and deception of the bank (see Daily GPI, Nov. 9, 2009).

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