04/25/2012 11:16 pm ET Updated Jun 25, 2012

Kevin Cassidy, Ex-Brokerage Firm CEO, Sentenced To 30 Months For Defrauding Bank Of Montreal


By Grant McCool

NEW YORK, April 25 (Reuters) - A former chief executive of Optionable Inc commodities brokerage was handed a prison term of 2-1/2 years on Wednesday for his role in defrauding the Bank of Montreal by helping inflate the value of the bank's natural gas derivatives portfolio.

In August last year, the former Optionable executive, Kevin Cassidy, of Bedford Hills, New York, pleaded guilty to one count of conspiracy to commit wire fraud in Manhattan federal court. Cassidy was charged in November 2008 with six felony counts.

U.S. District Judge Thomas Griesa sentenced Cassidy on Wednesday to 30 months in prison to be followed by three years of supervised release. The judge also ordered Cassidy to forfeit $200,000, a statement by federal prosecutors in Manhattan said.

Prosecutors had accused Cassidy of helping David Lee, Bank of Montreal's former lead commodities trader, inflate the fair market value of natural gas options positions in his derivatives trading portfolio from 2004 to 2007.

In return, they said Lee funneled trades to Cassidy, resulting in Bank of Montreal generating more than 40 percent of Optionable's brokerage revenue by early 2007. Lee pleaded guilty in November 2008 and is awaiting sentencing.

When the scheme unraveled, Bank of Montreal stopped doing business with Optionable, causing the brokerage's shares to plunge after a more than sixfold gain in less than two years.

Lee's trading contributed to a C$853 million loss in Bank of Montreal's commodities trading business for 2007, which reduced profit by C$440 million.

The case is USA v. Cassidy in U.S. District Court for the Southern District of New York, No. 11-01101