Who’s Who in the Expert Network Investigations
Employees of Primary Global Research (PGR):
Don Ching Trang Chu, who had worked as a Taiwan liaison at PGR, pleaded guilty on June 7th, 2011 to one count each of conspiracy to commit securities fraud and conspiracy to commit wire fraud. Chu was arrested on November 24th, 2010 and accused of passing inside information on Atheros Communications Inc. (ATHR), Broadcom Corporation (BRCM) and Sierra Wireless Inc. (SWIR), in addition to the unnamed tech company thought to be AMD.
James Fleishman was a salesperson for PGR arrested December 16, 2010 on charges that he arranged for hedge funds to speak to consultants, knowing the consultants would provide inside information to the funds. Entered not guilty plea and faces trial.
Bob Nguyen, a former semiconductor vertical analyst at PGR, pleaded guilty on January 12th, 2011 to providing inside information to PGR clients. Among other things, Nguyen was accused of obtaining confidential Dell pricing information and information on Dell’s utilization of Western Digital and Seagate hard drives from Daniel DeVore and passing these to selected clients in emails titled “Handle With Care.”
Clients of PGR:
Richard Choo-Beng Lee pleaded guilty in 2009 in the insider-trading prosecution of Galleon Group hedge fund founder Raj Rajaratnam and 22 other traders. Lee, who once worked for hedge fund SAC Capital, became a client of PGR in late 2008 or early 2009 according to the complaint against Chu. Lee was a witness against Chu and Longoria.
Karl Motey, a former sell side technology analyst who ran his own independent research boutique, Coda Group Inc., pleaded guilty on Dec. 14, 2010. He signed up as a PGR client at the request of the Government, and made over 60 calls seeking incriminating evidence. Motey was apparently fingered by one of his hedge fund clients (unnamed, possibly Freeman), who is cooperating with the Government. Motey, who is identified as CW-2 in the complaint against Fleishman et al., provided evidence against Fleishman, Nguyen, Longoria, Shimoon and Karunatilaka.
Samir Barai, founder of New York-based Barai Capital Management, which reportedly ran less than $100 million in assets, pleaded guilty May 27, 2011 to securities fraud and other charges. Barai was arrested February 8, 2011 and named as a co-conspirator (CC-1) in the Jiau complaint, allegedly receiving inside information about Marvell and NVDIA from Jiau. Prior to founding Barai Capital, he worked for Citigroup’s Tribeca fund and Ziff Brothers Investments.
Jason Pflaum, a technology analyst at Barai Capital working for Samir Barai, entered a guilty plea December 14, 2010, after allegedly obtaining inside information about Marvell and NVDIA from Jiau. Pflaum was a cooperating witness against Barai.
Noah Freeman, a former portfolio manager in SAC Capital’s Boston office, who entered a guilty plea February 7, 2011 after acting as a cooperating witness for the government against Barai and Longueuil. Freeman and Barai maintained an exclusive relationship with Jiau, an expert provided by PGR and separately charged in December. Freeman allegedly shared information obtained from Jiau with Longueuil. Prior to SAC, Freeman was at Sonar Capital Management LLC, Brookside Capital and Bain Capital.
Donald Longueuil, a former portfolio manager at CR Intrinsic Investors LLC, an affiliate of SAC Capital pleaded guilty to conspiracy to commit securities and wire fraud and to securities fraud April 28, 2011. Besides getting tips from Jiau via Freeman, Longueuil and Freeman each had their own network of sources, going beyond experts recruited by PGR. He previously worked for Empire Capital Management, LLC, and Morgan Stanley.
Experts Affiliated with PGR:
Mark Anthony “Tony” Longoria, a Round Rock, Texas-based supply chain manager for Advanced Micro Devices Inc., pleaded guilty June 30, 2011 to providing confidential details about AMD revenue and sales. Longoria was paid $200,000 by PGR for consultations occurring between January 2008 and March 2010.
Walter Shimoon, a senior director of business development at Flextronics International, pleaded guilty July 5, 2011 to providing confidential information about Flextronics and Apple Inc. The complaint alleges that he was paid $22,000 for consultations occurring between January 2008 and June of 2010. Shimoon in court also admitted to being paid $27,500 by independent research firm Broadband Research (see John Kinnucan, below).
Manosha Karunatilaka, a manager at Taiwan Semiconductor Manufacturing Company North America in Burlington, Mass., pleaded guilty to one count of conspiracy to commit wire and securities fraud on May 11, 2011. He was arrested December 16, 2010 and accused of providing bookings information about clients of Taiwan Semiconductor. He reportedly earned about $35,000 between January 2009 and June 2010.
Daniel DeVore, a global supply manager at Dell Computer, pleaded guilty on December 10, 2010 and acted as a cooperating witness (CW-3) and providing evidence against Fleishman and Nguyen. DeVore allegedly received $145,740 for consultations.
Winifred Jiau, a contractor employed by NVDIA, was convicted on June 20, 2011 on securities fraud and conspiracy to pass along confidential information. She was arrested on December 29, 2010 and accused of providing inside information about computer chipmakers Marvell Technology Group Ltd. and Nvidia Corp. Jiau was part of PGR’s “private” network, meaning she was reserved to consult exclusively with Barai and Freeman, who sometimes called her together. The complaint says that Jiau was paid $10,000 per month by PGR, but the amounts paid by Barai Capital and Sonar Capital/SAC to PGR are not disclosed. Jiau allegedly made $200,000 between September 2006 and November 2008 through consultations arranged by PGR.
“Fairchild Source”, mentioned in the complaint against Barai, was an “insider” at South Portland, Maine-based chip maker Fairchild, who allegedly provided information about Fairchild’s sales, profit margins and inventory, and told him how much revenue the company collected from customers including Dell Inc., Samsung Electronics Co. Ltd. and Nokia Oyj. The Fairchild Source was paid about $48,000 between October 2006 and October 2009. It is not clear whether this source was sourced through PGR or directly by Barai.
“Actel Source”, named complaint against Barai, was an employee of Actel who had worked at various semiconductor firms and allegedly provided Actel revenue information prior to public release. It is not clear whether this source was sourced through PGR or directly by Barai.
Others not affiliated with PGR
Yves Benhamou, a French doctor arrested November 2, 2010, is accused of passing information about clinical trial of a Human Genome Sciences drug to Frontpoint Partners. Benhamou was sourced through Guidepoint Global, but apparently passed the inside information outside of the expert network. Benhamou pleaded guilty in April 2011.
Joseph F. “Chip” Skowron, a former portfolio manager for Frontpoint Partners, was arrested April 13, 2011 for allegedly obtaining inside information from Yves Benhamou. Skowron is reportedly pleading not guilty.
James Silverman, portfolio manager of Risk Reward Capital, a hedge fund with $24 million in capital, was charged by Massachusetts securities regulators with obtaining inside information on two pharmaceutical companies. The complaint accused Silverman of using Guidepoint Global to get inside information on clinical trials that helped him to “score dramatic returns” for his fund. The complaint states that Silverman paid $80,000 to retain Guidepoint after losing 16.9% in 2007, and after retaining Guidepoint in early 2008, his fund returned 55% in 2009 and 52% in 2010.
John Kinnucan, a principal at Broadband Research LLC in Portland, Ore., sent an email on Oct. 26 to roughly 20 hedge-fund and mutual-fund clients telling of a visit by the Federal Bureau of Investigation. Kinnucan has not been charged.