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The Canary Tapes


Court documents reveal that before the former hedge fund Canary Capital began trading electronically with Bank of America, one of its traders, Noah Lerner, had the following conversation on May 10, 2001, with former BoA broker Ted Sihpol. According to Attorney General Eliot Spitzer, Lerner is outlining to Sihpol that he would time stamp "a bunch of tickets" before 4 p.m. each day, but that Canary would actually provide its trades up to 5:30 p.m.

Lerner: Okay, great. We will be able, even before we get electronically [sic], we will be able to send that, um fax to you by around 6 p.m.

Sihpol: If you could do it... they actually need to drop it by... 5:30 is their latest.

Lerner: It's 5:30, their latest time-

Sihpol: Yes, so if you get it to me by 5-ish, just to make sure that I have enough time to write it. And that gives them a little pad time as well.

Lerner: You got it.

Sihpol: So, 5 is-5 is great. And we'll make sure that, you know... just to let you know...they want to see stamped tickets, or-they want to see tickets that are stamped before 4 o'clock because we are doing it manually.

Lerner: Right.

Sihpol: So, I'm just going to stamp a bunch of tickets every day. That's all.

In a recorded telephone conversation the following day, Spitzer alleges, Lerner and Sihpol amended that process. The two agreed, court documents reveal, that Canary would fax or e-mail proposed trades to Bank of America early in the day for Sihpol to time stamp. Canary would then confirm or cancel the trades before 5:30 p.m., the attorney general said. Then, Sihpol or a team member would transmit via fax the confirmed trades to the San Francisco office and discard any time-stamped order tickets for cancelled trades.

Sihpol, the attorney general contends in the document, even offered that if something in the plan went awry, he knew the "technician" who had the key to the time stamp.

Sihpol: Ted Sihpol

Lerner: Hi Ted, it's Noah.

Sihpol: Hey, Noah.

Lerner: Yeah, the one thing, I did want to talk, I didn't want to have other ears on board necessarily...

Sihpol: Yeah.

Lerner:... is what I thought I would do is send you, um, a copy, you know, Andrea and Drew, also, the three of you ...

Sihpol: Mmm...

Lerner: ...on a daily basis, you know, a proposed, you know, what trades we think we're gonna do, if we're gonna do it.

Sihpol: Oh, that would be huge.

Lerner: And that way, you can, you know, I could send this to you, probably by, you know, 2, 2:30.

Sihpol: Uh-huh...

Lerner: That way you could time stamp them. Then I'll call you up like about 4:30, quarter to five, saying put them through.

Sihpol: Yes.

Lerner:...or put them in the garbage.

Sihpol: Or, yeah, exactly, and basically, what I did in anticipation of that...

Lerner: Uh-huh.

Sihpol:...basically, you know, put a reminder on Andrea's Outlook and mine, and just said, hey, you know what, at the beginning of every day, you know, "market on open," stamp five tickets.

Lerner: Right.

Sihpol: And worst-case scenario is we divide all the tickets in half and, you know, write on that one. Right.

Lerner: This way, you have plenty of time to write them up and it's just a matter, do you drop them...

Sihpol: (Inaudible).

Lerner: ...or where you drop them, is it in the account or do you drop them in the trash?

Sihpol: Exactly, you know, do you rip them in half and toss them. And the bottom line is, too, Noah, I mean, as far as the time stamp is concerned, you know how that works.

Lerner: Oh, absolutely. And that's why I figured by me sending all three of you e-mail, some of you will get the e-mail during the day and I'll actually, you know.

Sihpol: Uh-huh.

Lerner: I'll answer a conf..., someone confirm back, and yes, we received it.

Sihpol: Sure.

Lerner:...and then we know it's handled, and you guys don't have to worry about compliance.

Sihpol: Yeah.

Lerner: Or anything, and you're all covered too.

Sihpol: Right.

Lerner: Because I don't want, I want to make sure that everybody is covered how they have to be covered.

Sihpol: Absolutely, absolutely, and you know, time stam...[sic] I mean worst case come to worst, between you and I, ah, you know, technician has the key if you follow my...

Lerner: I understand.

Sihpol: Good.

Lerner: Listen, I used to know the people in the mailroom very well. It's the way it works. I used to be a tax guy and, really, those deadlines were very critical to me, and I use [sic] to make friends with the guy in the mailroom.

Sihpol: Oh, yeah...a case of beer is irrelevant when it comes right down to it.

Lerner: You got it. Alright.

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