A linebacker and a Harvard whiz get themselves in a heap of trouble over stock tips
By TIMOTHY BELLA | The Washington Post | Published: September 7, 2018
Mychal Kendricks said he was drawn in by the allure of being more than just a football player. But that did not stop him from worrying the first time he got involved with insider trading.
It was the summer of 2014 and Kendricks, who was coming off his second season with the Philadelphia Eagles, used part of his offseason to exchange investment and business ideas over the phone with Damilare Sonoiki, a friend working as an analyst for the Investment Bank, a New York-based firm.
He learned that the Investment Bank was advising Compuware, a Michigan-based computer software manufacturer, in a transaction that would take the company from public to private. The information, which had not been publicized, was quintessential insider information. He passed it on to Kendricks, which made him an insider as well under securities law.
Kendricks opened a new brokerage account specifically for Compuware and other transactions and transferred $80,000 into it. Sonoiki purchased thousands of Compuware call options for Kendricks' account, according to a 21-page complaint filed by the Securities and Exchange Commission last month. Despite using coded language in text messages and FaceTime conversations to disguise the nature of the financial information they were discussing, Kendricks grew concerned about what they were getting into.
"I'm getting scared Bruh," Kendricks wrote to Sonoiki in a text message on Aug. 23, 2014.
"bro, don't get scared," Sonoiki responded.
"I'm getting kind if-y Bruh . . . Bruh idk," Kendricks wrote.
"I hear u. it's still happening, just taking longer than it was supposed to," Sonoiki replied.
Days later, the news broke of Compuware going private. Sonoiki sold all of Kendricks' call options (which give the owner the right to buy stock at a fixed price during by a specific date) netting the linebacker a profit of $78,000.
The friends' first illegal trading scheme "generated returns of more than 130 percent in a little over a month," according to the SEC complaint.
"[y]ou the man," Kendricks told Sonoiki in a text, according to the complaint.
But their business of "bread" and "cheesesteaks," some of the language they used over text message to disguise their illegal activity, was far from over.
" . . . the bread in nyc just isn't the same and I really like my cheesesteaks with the stuff you all have in Philly," Sonoiki wrote him, referencing the kickbacks of cash, Eagles tickets and access to a celebrity lifestyle that Kendricks owed him for providing him with the insider information.
By the end of a two-year scheme that included insider trading deals involving three other companies, Kendricks had made nearly $1.2 million and paid Sonoiki $10,000 in kickbacks between 2013 and 2015.
The saga came to a head on Thursday inside a Philadelphia federal courtroom. Hours before his old team kicked off the start of the NFL season as defending Super Bowl champions, Kendricks, 27, pleaded guilty to federal charges of insider trading, according to William M. McSwain, U.S. Attorney for the Eastern District of Pennsylvania. He faces up to 25 years in prison, though will probably get much less. Kendricks' sentencing hearing is scheduled for Dec. 18.
Sonoiki is also expected to plead guilty, but a court date has not been set, wrote Mark T. Wilson, Sonoiki's attorney, in an email to the Philadelphia Inquirer.
Inside the courtroom, U.S. District Judge Gene E.K. Pratter asked the linebacker, who was signed by the Cleveland Browns in the offseason and later released, why he was pleading guilty, according to the Inquirer.
"I know that I made the decision to accept information, secret information, and it wasn't the right thing to do," Kendricks said to Pratter on Thursday.
The SEC's complaint outlined how the correspondence regarding these insider trading tips between Kendricks and Sonoiki evolved from text messages into FaceTime conversations, taking steps to minimize written communications.
"don't write," Kendricks texted Sonoiki on Sept. 5, 2014.
"can you Facetime on your laptop I know," Sonoiki replied. They would exchange another 19 phone calls in a two-day period in September 2014.
Later that month, Sonoiki and a friend attended an Eagles game with tickets Kendricks provided to them. Following the game against Washington, Kendricks paid his friend $6,000 in cash, according to the complaint.
It's a stunning turn of events for Kendricks, whose guilty plea and pending sentencing over illegally pocketing an extra $1.2 million likely means the end of his NFL career — one that reportedly paid him more than $20 million in six seasons.
Raised in Fresno, California, Kendricks leaned on his single mother and younger brother, Eric, after his father grew addicted to crack cocaine, according to the Los Angeles Times.
His mother, Yvonne Thagon, told the Los Angeles Times in 2014 that the roughhousing between Kendricks and his brother was so common that she made the boys carry insurance cards with them when they were in elementary school. "They were like little puppy dogs," Thagon told the Times. "Every day was an adventure."
In a statement last month, Kendricks expressed regret, saying that he failed his coaches, owners, teammates, fans and family members. Kendricks described Sonoiki as a "former friend of mine who I thought I could trust and who I greatly admired" who "gave me a false sense of confidence."
"While I didn't fully understand all of the details of the illegal trades, I knew it was wrong, and I wholeheartedly regret my actions," Kendricks said in a statement on Aug. 29.
He added: "Although I did not take any of the profits for myself, I am committed to repaying all of the funds gained illegally and accept the consequences of my actions."
By the time Kendricks first met Sonoiki at a party in late 2013, Sonoiki was seen as something of a rising star. Sonoiki, the son of Nigerian immigrants who wrote for the National Lampoon and Harvard Crimson, was Harvard's commencement orator in 2013. He would later head to Goldman Sachs before making a run at Hollywood in 2015, signing on as a staff writer for "Black-ish." He would be on staff of the critically acclaimed show for 24 episodes, acting as the sole writer for one episode, "Super Rich Kids."
"I have this two to four-year plan in my head where I was going to work in finance for two to four years, basically long enough to get from investment banking to an investing role like private equity or a hedge fund," he told Black Media Minute in 2016. "That would do two things, I would have enough saved up to move to LA and not be a starving artist but actually be able to try to be a writer and not have to . . . not have to be a starving artist.
The SEC previously announced that in the charges against Kendricks and Sonoiki, it "is seeking the return of their ill-gotten trading profits plus interest and penalties."
"Kendricks and Sonoiki allegedly tried to evade detection by using a variety of communication methods to hide their misconduct, but we were able to use methodical investigative work to piece together a trail of evidence and expose their insider trading scheme," said Joseph G. Sanson, chief of the SEC Enforcement Division's Market Abuse Unit, in an Aug. 29 statement.
When Kendricks told the federal judge that his guilty plea was because it was the right thing to do, Pratter said she wanted to make sure the linebacker wasn't coerced into pleading to something he didn't do. In 11 words, Kendricks reaffirmed his guilty plea and the choices he made.
"I'm making the decision because it's the right thing to do," Kendricks said.