Ex-SAC manager charged in $276 million insider scheme

NEW YORK, Tue Nov 20, 2012 – A former hedge fund manager who worked for a fund affiliated with Steven A. Cohen’s SAC Capital was arrested on Tuesday in what U.S. prosecutors are calling “the most lucrative insider-trading scheme ever.”

Mathew Martoma, who worked for CR Intrinsic Investors in Stamford, a unit of SAC Capital, has been accused of making more than $276 million in illicit profits based on tips about Elan Corp and Wyeth LLC, which was bought by Pfizer in late 2009.

Authorities contend Martoma and SAC Capital’s CR Intrinsic made more than $276 million in illegal profits or avoided losses in July 2008 by trading ahead of a negative public announcement involving the clinical trial results for an Alzheimer’s drug being jointly developed by Elan and Wyeth.

The charges against Martoma, who left the SAC Capital division in 2010, stem from the federal government’s long-running investigation into improper trading in the $2 trillion hedge fund industry.

To date, the investigation has led to more than 50 convictions with the most notable ones being former Galleon founder Raj Rajaratnam and former Goldman Sachs Group director Rajat Gupta.

Slowly, U.S. authorities have been filing charges and winning convictions against lower-level traders and analysts who once worked for Cohen, one of the hedge fund industry’s most successful and best-known traders.

Martoma’s lawyer, Charles Stillman, said his client was an “exceptional portfolio manager” and he is confident that Martoma will be exonerated.

A spokesman for SAC Capital and Cohen, who was not charged, said he was not immediately prepared to comment.

Research firm executive arrested on insider trading charges: FBI

NEW YORK, Tue Jun 26, 2012 – Law enforcement authorities said on Tuesday they arrested and charged an executive at an investment research firm as part of the government’s wide-ranging probe of insider trading at the now-defunct Galleon Group hedge fund.

Tai Nguyen of research firm Insight Research LLC surrendered to the FBI Tuesday morning, an FBI spokesman said, and was expected to appear in federal court in Manhattan later in the day.

Nguyen was facing charges related to insider trading, the FBI said, but the exact charges have not yet been made public.

Lawyers for Nguyen and the firm could not be identified immediately.

The FBI and federal prosecutors in Manhattan have mounted a campaign to root out insider trading on Wall Street, focusing in part on employees at so-called expert network firms who they say helped funnel corporate secrets from consultants at companies to hedge funds.

The FBI said Nguyen was charged as part of its investigation of wrongdoing at billionaire Raj Rajaratnam’s Galleon fund.

Rajaratnam was convicted of 14 counts of securities fraud and conspiracy last year and is serving an 11-year prison term.

His case led to the conviction this month of former Goldman Sachs Group Inc board member Rajat Gupta for feeding secret company tips to Rajaratnam.

Also, federal prosecutors said Adam Smith, a former Galleon employee turned government cooperator, will be sentenced later Tuesday before U.S. District Judge Jed Rakoff in Manhattan, who oversaw the Gupta trial.

Former Goldman board member Rajat Gupta guilty of insider trading

NEW YORK, Fri Jun 15, 2012 – Former Goldman Sachs Group Inc. board member Rajat Gupta was convicted on Friday of illegally tipping his hedge-fund manager friend Raj Rajaratnam with secrets about the investment bank, a major victory for prosecutors seeking to root out insider trading on Wall Street.

A Manhattan federal court jury found Gupta guilty of three counts of securities fraud and one count of conspiracy, ending the four-week trial. He was found not guilty on two other securities fraud charges.

The jury delivered the verdict on the second day of its deliberations. U.S. District Judge Jed Rakoff has set sentencing for Oct. 18.

The verdict marks a stunning fall for Gupta, who is also a former top executive at business consulting firm McKinsey & Co and a former director of Procter & Gamble.

Gupta’s one-time associate Rajaratnam, who was convicted of 14 counts of insider trading at a trial last year, is now serving an 11-year prison term.

Gupta’s fate may hinge on witnesses, not wiretaps

NEW YORK,| Thu Jun 14, 2012 – Through phone logs, trading records and a parade of witnesses, U.S. prosecutors repeatedly worked to connect the dots between Rajat Gupta, the former head of top consulting firm McKinsey & Co., and his hedge fund manager friend Raj Rajaratnam.

It is now up to a Manhattan federal jury to decide if this evidence against Gupta, a former board member at Goldman Sachs Group Inc. and Procter & Gamble Co., is persuasive enough to convict him.

Historically, insider trading cases have been difficult for prosecutors to win because of their circumstantial nature. The investigation of Rajaratnam – built on eight months of court-approved wiretaps and culminating in his conviction at trial last year – was a major exception because the government had dozens of secretly recorded telephone calls of him discussing stock tips with friends and associates.

In the Gupta case, prosecutors only had a few wiretaps they could use to bolster their charges that Gupta supplied Rajaratnam with some of his juiciest tips. They had no telephone recording between the two men to back one of their most dramatic contentions: that Gupta, a minute after disconnecting from a Goldman board conference call on Sept. 23, 2008, told Rajaratnam about plans by Warren Buffett’s Berkshire Hathaway to inject $5 billion in the investment bank.

The jury heard evidence that Rajaratnam hurriedly ordered his traders at hedge fund Galleon Group to try to buy $40 million worth of Goldman stock in the few minutes that remained in the trading day after he received that 35-second call from Gupta.

“There was only one call to Rajaratnam’s direct line in the last 10 minutes of the trading day, only one call in the last hour,” Assistant U.S. Attorney Richard Tarlowe said in his closing argument Wednesday. “And it was from Rajat Gupta.”

Gupta’s defense lawyer, Gary Naftalis, responded: “If he was truly rushing, he wouldn’t have waited a minute, he would have called in two or three seconds.”

Gupta insider-trading trial jury told of ‘top secret’ Buffett deal

NEW YORK,Wed May 23, 2012 – The deal that gave Goldman Sachs Group Inc. a $5-billion boost from renowned investor Warren Buffet at the height of the 2008 financial crisis was “as top secret as you could get,” a leading banker testified on Wednesday at the insider-trading trial of onetime Goldman board member Rajat Gupta.

Gupta is accused of tipping Galleon hedge fund founder Raj Rajaratnam about the deal in an illegal breach of his fiduciary duties.

Separately, a prosecutor told the judge on Wednesday, during a jury break, that a Goldman managing director, David Loeb, provided Rajaratnam with information about Intel Corp., Apple Inc. and Hewlett Packard.

Loeb’s name also came up Tuesday in evidence to the Manhattan federal court jury hearing the Gupta trial. A key defense argument is that Rajaratnam had sources other than Gupta to provide him confidential company information.

Loeb has not been charged. A Goldman spokesman declined to comment.

Former Goldman banker Byron Trott, a long-time Buffett confidant, told the jury that it was policy within a tightly-knit group of executives who negotiated such deals “never to talk about confidential information in public, or elevators. It was grounds for being fired.”

Rajaratnam says pressured to turn on friend: report

NEW YORK ― Just weeks before fallen hedge fund tycoon Raj Rajaratnam was sentenced to 11 years in prison for insider trading, U.S. prosecutors pressed him to turn on his friend, former Goldman Sachs director Rajat Gupta, The Daily Beast online newspaper reported.

In his first interview about his case, Rajaratnam was quoted as saying that he was initially asked on the day of his Oct.

16, 2009 arrest to “wear a wire” and record conversations with Gupta, also a longtime global head of elite consultancy, McKinsey & Co.

The article, posted at bit.ly/oSXZ8 , said prosecutors asked Sri Lankan-born Rajaratnam again as late as two weeks before his October 13 sentencing in Manhattan federal court.

“They wanted me to plea bargain,” The Daily Beast quotes the Galleon Group founder as saying, in an interview at his Manhattan apartment where he is under house arrest. “They want to get Rajat. I am not going to do what people did to me. Rajat has four daughters.”

The opinion of a Sri Lankan astrologist combined with a history of suspected persecution led to Rajaratnam’s decision to fight the case, despite extensive phone taps and other overwhelming evidence, the report said.

“He (the astrologer) said that eventually I would prevail,” Rajaratnam, 54, was quoted by The Daily Beast as saying.

A spokeswoman for Rajaratnam’s lawyers at law firm Akin Gump declined to comment on Monday. A spokesman for Gupta’s lawyer, Gary Naftalis, referred to previous statements that his client had done nothing wrong and that a civil case brought by the U.S. Securities and Exchange Commission was baseless.

A spokeswoman for the office of the Manhattan U.S. Attorney, who brought the case, declined to comment.

The investigation featured extensive use of secret FBI phone taps. Such tactics usually are reserved for Mafia and drug trafficking investigations, but the hedge fund manager and several of his South Asian business associates and friends were recorded or agreed to be recorded.

Rajaratnam, the central figure in a sprawling insider trading case, was convicted by a jury in May on all 14 criminal charges he faced. His 11-year prison sentence is the longest ever in an insider-trading case. He must report to prison on Nov. 28.

Rajaratnam told the newspaper he respected the U.S. justice system.

“In Sri Lanka I would have given the judge 50,000 rupees and he’d be sitting having dinner at my house,” Rajaratnam was quoted as saying. “Here, I got my shot. The American justice system is by and large fair.”

Primary Global Research expert pleads guilty in insider probe

NEW YORK ― A former senior director at Flextronics International pleaded guilty on Tuesday, telling a U.S. judge he was paid $200 an hour by an expert network firm to spill inside information to hedge funds.

Walter Shimoon, 39, was the latest out of more than a dozen accused in a broad insider trading probe to plead guilty in Manhattan federal court to working illegally while consulting for Primary Global Research (PGR).

At the plea hearing on Tuesday, Shimoon told U.S. District Judge Jed Rakoff that he was paid $200 an hour by PGR to give secrets about Flextronics or its customers to hedge funds and investors, often over the phone.

“On these calls, I offered specific non-public information,” Shimoon said.

A U.S. representative for Singapore-based electronics equipment maker Flextronics, Renee Brotherton, declined to comment on the guilty plea.

Shimoon, arrested in December, was accused of leaking secrets about Apple Inc iPad ahead of its launch and giving up new details about the company’s iPhone 4.

Following an agreement with prosecutors, Shimoon pleaded guilty to two counts of conspiracy to commit securities fraud and wire fraud and one count of securities fraud. He faces up to 30 years in prison at his July 8, 2013 sentencing.

Shimoon on Tuesday also said he provided production schedules and sales forecasts for Flextronics provider Omnivision Technologies to PGR customers.

“I knew they (the customers) used the information I provided in purchasing and selling securities,” Shimoon said.

One customer, identified in court papers as a hedge fund in White Plains, New York, was named in court by assistant U.S. Attorney Antonia Apps as Kingdom Ridge Capital. Shimoon’s contact there, Apps said, was employee Nick Caputo. Caputo did not immediately return a call requesting comment.

Court documents unsealed on Tuesday said the hedge fund made $560,000 in profits in October 2009 by trading on Flextronics secrets provided by Shimoon.

Kingdom Ridge Capital, founded in 2008 by two former SAC Capital Advisors LP employees, had under $350 million invested in U.S. equities according to a recent regulatory filing.

In the ongoing investigation, a number of former SAC traders and analysts have either been implicated or investigated but no charges have been filed against SAC Capital’s founder, the billionaire trader Steven Cohen or any other SAC employees.

Shimoon in court also admitted to being paid $27,500 by independent research firm Broadband Research.

A lawyer for John Kinnucan, the firm’s owner, declined to comment on the hearing, but said his client was innocent of any wrongdoing.