Hedge fund manager charged with insider trading

NEW YORK – A California-based hedge fund manager surrendered to FBI agents on insider-trading charges on Friday, the latest in a series of cases brought by the U.S. government in recent years against money managers and traders.

An FBI spokesman said an indictment would be unsealed later on Friday in federal court in New York outlining the charges against Doug Whitman, the founder of Whitman Capital in Menlo Park, Calif. The hedge fund’s website describes it as a private partnership focused on the technology industry.

Whitman denies that he traded on the basis of unlawfully obtained inside information, his lawyer said in a statement. The lawyer, David Anderson of Sidley Austin LLP, said Whitman had cooperated with the government’s investigation.

“Mr. Whitman did not pay any insiders or provide any personal benefit to any insiders for inside information,” the statement said.

Anderson said the charges were based on information provided to investigators by two traders, Roomy Khan and Karl Motey, who have pleaded guilty to insider trading and conspiracy charges.

“Their claims are false and will be proved false.”

A spokeswoman for the office of the Manhattan U.S. Attorney declined comment because the indictment was not yet public.

Dozens of hedge fund managers, traders, consultants, lawyers and executives have been charged since 2009 in a sweep by federal authorities to stop money managers from gaining an illegal edge in the market with inside information.

Hedge funds take in $6.1 billion in August, outperforming markets

NEW YORK ― Hedge funds took in $6.1 billion in August as the industry outperformed slumping markets, according to data released on Monday.

August marked the seventh month this year when inflows into the $2 trillion hedge fund industry exceeded redemptions, according to figures compiled by BarclayHedge and TrimTabs Investment Research. Hedge funds took in $51 billion in the first eight months of the year.

The vicious market sell-off that began in August and continued into September hurt many hedge fund managers, who lost 5.02 percent on average in the third quarter, according to Bank of America Corp research.

The wild market swings even demolished returns for such industry stars as John Paulson and Lee Ainslie.

Paulson rose to fame with prescient bets on the subprime crisis and gold, but his hedge fund firm, Paulson & Co, is one of this year’s worst performers. One of its biggest funds, Advantage Plus, is off 46.73 percent in 2011, said two people who saw the numbers. The fund lost 19.35 percent in September alone.

Despite disappointing performance by individual managers, investors continued to pour money into hedge funds, which outperformed the Standard and Poor’s 500 stock index in the first eight months of the year.

“Recent inflows might owe in part to excellent relative performance,” said BarclayHedge President Sol Waksman. “While the S&P 500 plunged 10.6 percent in the four months ended August, the Barclay Hedge Fund Index decreased only 5.6 percent.”

Waksman also said that preliminary data for September showed hedge funds beat the S&P 500 again last month.

Risk-averse investors have piled into fixed income hedge funds in 2011. This type of fund, which invests in securities like corporate bonds and Treasuries, has been the most popular destination for new capital in 2011, taking in $14.6 billion this year.

Fixed income funds are also the best performing type of fund in 2011, returning 3.6 percent, the BarclayHedge data showed.

Hedge fund manager Skowron pleads guilty to insider trades

NEW YORK ― Former FrontPoint Partners hedge fund manager Dr. Joseph “Chip” Skowron pleaded guilty on Monday for his role in an insider trading scheme.

Skowron, 42, told a Manhattan federal court judge that in 2008 he traded stock in Human Genome Sciences Inc on nonpublic information he received from a French doctor who served as a consultant for the biotech company.

Skowron, who managed several healthcare funds, also admitted he gave false testimony under oath to the U.S. Securities and Exchange Commission.

“I knew my actions were wrong and I deeply regret my participation in these activities,” he told U.S. District Court judge Denise Cote.

The Greenwich, Connecticut resident, who has a medical degree and doctorate in cellular and molecular biology from Yale University, was one of the most prominent investors to become embroiled in a two-year crackdown on insider trading.

In April, federal prosecutors charged Skowron with showering a French physician, Dr. Yves Benhamou, with cash and a luxury trip to New York in exchange for information about Human Genome. Prosecutors said tips from Benhamou about the company’s experimental hepatitis C treatment helped Skowron’s funds avoid $30 million in losses.

Benhamou pleaded guilty in April to providing tips about Human Genome to Skowron.

At the court hearing Monday, Skowron said he provided Benhamou with benefits and received tips from him.

“I understood what I was doing was illegal,” said Skowron, who appeared composed throughout the hearing.

Under an agreement with prosecutors, Skowron pleaded guilty to conspiracy to commit securities fraud and obstruct justice.

Skowron faces a maximum of five years in prison. He is scheduled to be sentenced Nov. 18.