The art of selling stocks with a card up your sleeve
It seems that the Chilean Justice decided, finally, to do its job and issue a condemning verdict that everyone saw coming. The lucky one to receive this poisoned gift is the businessman and former Minister of Sports, Gabriel Ruiz-Tagle. His crime: playing monopoly with real-life information, specifically, cheating with insider information to move like a fish in water in the murky world of stock trading. All this, according to the prosecutor’s office, which apparently still believes in the idea that the rules are to be followed.
Ruiz-Tagle, who had the dubious honor of being the country’s first Sports Minister after the creation of the ministry in 2013 (an idea as brilliant as putting an open bar in a monastery), showed that his talents are not limited to politics. The facts judged, of course, are after his public function, because why get your hands dirty with current power when you can use past contacts?
The master move that didn’t turn out so well
The Oral Criminal Court of Santiago, in a burst of lucidity, accepted the arguments of the Public Ministry and decided that, indeed, violating the Stock Market Law is something that is wrong. What a revolutionary concept. Although the ruling has already been issued, we will have to wait until September to know the exact penalties, because in justice everything must have its drama and suspense, like a cheap soap opera. The defense will be able to appeal, of course, because in this system, a verdict is only the opinion of the first instance.
The Public Ministry, in a burst of ambition, requested a sentence of three years in prison, suspension from holding public office (because he clearly did it so well the first time) and disqualification from serving as a manager or director for five years. Basically, they asked him to take a long, well-deserved forced vacation from the elite.
According to prosecutor Jaime Retamal, Ruiz-Tagle did not commit a classic crime of fraud or corruption, oh no! This was something much more sophisticated: a crime contemplated in the Securities Market Law. Because who needs to rob a bank when you can manipulate the system from within with elegance and style?
The facts take us to May 2018, a time when the now former minister decided that it was a good time to sell 4 million shares. The reason? He had obtained that insider information that Wall Street sharks and their South American cousins like so much. At that time, Ruiz-Tagle was director of Blanco y Negro, the public limited company that manages the Colo-Colo sports club. Because what better place to hide than in plain sight, managing one of the most popular teams in the country?
The privileged information consisted, according to Retamal, that the man had access to the company’s financial statements, saw the increase in the share price that was coming and, with the forecast of a meteorologist on a sunny day, sold his 4 million shares before the market knew what was coming. The profit: a modest 1,200 million Chilean pesos, or what is the same, 1.2 million dollars. Pocket money for someone who clearly needs to save for the fine.
It was not fraud, the prosecutor insisted, but rather breaking the Stock Market rules. Because as a managing shareholder, he could not do business with information that the rest of us did not have. That boring rule that exists to prevent the rich from getting richer obscenely quickly. “Naturally, with this he incurred a very relevant crime, very serious from the point of view of stock market crimes,” added Retamal, with the serious face of someone explaining why one should not put their fingers in the socket.
Of course, in a plot twist that no one expected, the court acquitted him of another similar crime related to the purchase of assets. Because condemning him for everything would have been too efficient, and justice prefers the “piecemeal” format.
Meanwhile, Ruiz-Tagle’s defense, displaying commendable patience, said that it will wait for the arguments of the sentence to evaluate “whether or not an appeal for annulment is appropriate.” Translation: We’ll see if we believe the story or appeal until we run out of resources and the court’s patience.
So you know, friends: in the world of high finance, information is power, but using it for your own benefit can have consequences… sometimes. Only sometimes.
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