Two Ex-Brokers Acquitted in `Squawk' Case; One Guilty (Update4) By Karen Freifeld May 10 (Bloomberg) -- Three ex-brokers at Citigroup Inc., Merrill Lynch & Co. and Lehman Brothers Holdings Inc., on trial for selling access to trades over internal ``squawk boxes,'' were acquitted of fraud along with four day-trading executives. A jury of six men and six women deliberated five days before returning a verdict. Ex-Merrill broker Timothy O'Connell was found guilty of witness tampering and making a false statement, the only convictions out of 40 charges filed. U.S. District Judge I. Leo Glasser in Brooklyn, New York, federal court declared a mistrial on one conspiracy count after the jury deadlocked. Today's verdict is the latest defeat of U.S. efforts to prosecute ``front running,'' trading ahead of large orders that sharply change stock prices. In February, a federal judge in Manhattan threw out the conviction of an ex-New York Stock Exchange specialist for making trades for his firm before customer orders. Of 15 specialists charged with fraud in April 2005, two were acquitted, and seven had their charges dropped. ``The government overreached,'' defense attorney Jeffrey Hoffman said of today's verdict. They ``charged the defendants with activities that had never previously been the basis for criminal charges.'' A.B. Watley shares more than doubled on news of today's verdict, reaching 7 cents in over-the-counter trading. Access Prosecutors claimed the brokers conspired to give traders at New York-based A.B. Watley Group Inc. access to company intercoms in exchange for cash and commissions. U.S. Securities and Exchange Commission official Mark Schonfeld said today the agency will proceed with related civil suits against the defendants filed in 2005 and 2006 that were on hold pending the end of the trial. Brooklyn U.S. Attorney Roslynn Mauskopf alleged it was illegal for traders to profit by listening in on large orders broadcast internally at the securities firms. The traders bought or sold stock ahead of the orders in anticipation of share-price swings, prosecutors claimed. ``The case never should have been brought,'' defense lawyer Stephen Scaring said. ``What was going on with squawk boxes was generally considered acceptable and if the government wanted to change the rules they should have notified everybody.'' Mauskopf spokesman Robert Nardoza wouldn't comment. The government must decide whether to retry or dismiss the conspiracy charge against the seven defendants. ... Full story: http://www.bloomberg.com/apps/news?pid=20601087&sid=aaE2oiKCoFd4