Legal News

Radio Rating, Insider Trading; Cuomo Probes Arbitron Execs

By Dan Slater

The Martin Act, it seems, is getting a nice workout, thanks to NY AG Andrew Cuomo.

The 1921 New York law, according to the WSJ, spells out a broad definition of securities fraud and can be used to pursue civil and criminal penalties. Some say the Act has provided the New York AG’s office with more authority to pursue securities-fraud in an era when federal regulation has come under fire for having a case of the slows.

The next possible target: Executives at Arbitron, a radio-ratings firm, are being investigated to see whether they improperly sold stock ahead of news that hurt the company’s share price. (Arbitron ratings is the radio industry’s equivalent to the Nielsens for television.) Here’s the story.

The probe follows litigation that Cuomo and the New Jersey AG filed this month alleging that Arbitron’s new ratings system, the Portable People Meter, undercounts minority listening, which the company denies. “We have begun a review of stock sales made before the Portable People Meter delay announcement in November 2007,” Alex Detrick, a spokesman for Mr. Cuomo, said in a prepared statement. “The review is in its early stages and any allegations of insider trading should be taken as only that — just allegations. It remains to be seen where the facts will lead.”

Cuomo’s office is looking at whether Arbitron executives — presumably aware that criticisms over sample audiences for the People Meter could cause a delay in its rollout — continued to issue positive statements about the system and sold stock before announcing that the company would push back the introduction of the People Meter in several big cities.

An Arbitron spokesman said the company is cooperating with the inquiry. The company declined to comment further.

Cuomo, like his predecessor in the AG’s office, Eliot Spitzer, “has correctly seen that the SEC, which initiates most insider-trading cases, has limited resources and has been criticized for not being aggressive enough,” says Robert Ray, a former federal prosecutor who’s now at Pryor Cashman. “He has figured out the merits of filling the void.”

Full post as published by Law Blog - WSJ.com on October 29, 2008 (boomark / email).