Tags: Insider Trading Charges

SEC Files Insider-Trading Charges Against 6 Over Tech Tips

Friday, 04 Feb 2011 07:37 AM

Federal regulators on Thursday filed insider-trading charges against six people they say worked for an expert-networking firm and passed on confidential corporate information to investors.

Expert networks connect analysts and experts with investors seeking information, for a fee. They are playing a growing role on Wall Street.

The Securities and Exchange Commission announced the civil charges against the six, accusing them of passing tips to hedge funds and other investors that enabled them to make about $6 million in illegal profits. They had previously been named in criminal cases brought by federal prosecutors, as part of what authorities say is the biggest hedge fund insider-trading case in history.

The SEC said four of the six were employees of technology companies who moonlighted as consultants and exploited their access to confidential information about Advanced Micro Devices Inc., Apple Inc., Dell Inc. and other companies.

The six were consultants or employees of Primary Global Research, based in Mountain View, Calif., which connects experts and consultants with investors seeking information in the technology, health care and other industries. Prosecutors have portrayed the firm as an incubator for insider trading.

Named by the SEC were Mark Anthony Longoria, Daniel DeVore, Winifred Jiau, Walter Shimoon, Bob Nguyen and James Fleishman.

The U.S. attorney's office in Manhattan announced that an indictment was returned Thursday against Fleishman on criminal charges of conspiracy to commit securities fraud and conspiracy to commit wire fraud.

His attorney, Ethan Balogh, said "Mr. Fleishman is innocent of these charges, and we intend to contest them and establish his innocence at trial."

Balogh declined to comment on the SEC charges, saying he hadn't yet seen the civil lawsuit.

Nguyen and DeVore pleaded guilty to similar charges in federal court in Manhattan in recent months.

The six Primary Global consultants and employees "schemed to facilitate widespread and repeated insider trading by several hedge funds and other investment professionals," SEC Enforcement Director Robert Khuzami said in a statement.

The SEC is seeking unspecified restitution and civil fines from the six; the agency also seeks to bar Longoria, DeVore and Shimoon from serving as officers or directors of any public company.

Attorneys representing Longoria, DeVore, Jiau and Nguyen declined to comment Thursday. Shimoon's lawyer didn't return a telephone call seeking comment.

The networks of industry analysts, experts and consultants channel details between corporate America and Wall Street about what companies are up to — potentially giving some investors an unfair edge. The networking firms set up meetings and calls between current and former managers, and traders who want an investing edge.

The government's investigation targeting financial industry players accused of masking inside information as legitimate research is an offshoot of what's been called the biggest hedge-fund insider-trading probe in history. That probe of the Galleon group of hedge funds, revealed with arrests last year, accused more than two dozen defendants of conspiring to share secrets that led to over $50 million in illegal profits.

Among those arrested was Raj Rajaratnam, a one-time billionaire who founded the Galleon group. Free on $100 million bail, he has pleaded not guilty and maintains that he only traded on publicly available information. A person familiar with the probe said Wednesday that the government has identified Rajaratnam's brother, Ragakanthan, as a co-conspirator in the scheme.

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