Published April 30, 2013
Gerson Lehrman Group, the country's largest expert network firm, has hired a Securities and Exchange Commission enforcement attorney to serve as its chief compliance counsel, the company confirmed on Tuesday.
Gerson Lerhman's hiring of Michael King, an attorney from the SEC's office in Fort Worth, Texas, comes as the regulator and federal prosecutors scrutinize whether expert network firms in general may help hedge funds engage in insider trading.
Hedge funds often tap expert network firms to help match them up with industry consultants to assist them in formulating trading strategies.
Gerson Lehrman Group has not been named as the target of any enforcement cases.
"As the world's leading platform for expertise, we understand how important it is for decision makers to tap expert insights and also the need for a rigorous and robust compliance framework," Laurence Herman, the general counsel at Gerson Lehrman Group, said in a statement provided to Reuters.
"Michael's expertise and experience will be a valuable addition to our growing team and we are very pleased to have him join us."
In the government's insider-trading investigation, expert network firms have played a central role with some consultants for several firms being charged by federal authorities with passing confidential corporate information on to hedge fund traders.
Tom Sporkin, a former chief of the SEC's Office of Market Intelligence who is now a partner with BuckleySandler, said it makes sense for an expert network to hire an SEC enforcement lawyer.
"These companies that want to run legitimate shops are very concerned they will be wrapped up in one of these schemes. Some of these funds can be aggressive," he said.
"Having an SEC enforcement attorney as your compliance officer is a smart investment for an expert network in this time of a government crackdown. It is nice to have that person out in front if the SEC comes knocking."
Gerson Lehrman is the largest expert network firm, with 20 offices worldwide. It works with dozens of hedge fund clients, as well as other Fortune 1000 companies.
Its second largest office is in Texas, where King is based.
Gerson Lehrman came under the spotlight a bit last year after former SAC Capital portfolio manager Matthew Martoma was indicted for insider-trading.
Federal authorities had alleged that a former Gerson Lehrman consultant provided inside information to Martoma about a clinical drug trial.
The former consultant, Sidney Gilman, was a doctor who was involved in a clinical trial for an Alzheimer drug being developed jointly by Elan Corp and Wyeth, which is now a unit of Pfizer.
Gilman is a cooperating witness in the case against Martoma.
A person familiar with the firm's hiring decision said King was not tapped as a response to any of the government's insider-trading cases, but was brought on board because the firm has continued to grow and has been adding more staffers in the last few years.
King, who started his new job on Monday, previously worked in the SEC's Texas office as an assistant regional director as well as a lawyer in the enforcement division's unit that specializes in bribery cases.
In a statement, King said he was excited about his new job working for Gerson Lehrman.
"Primary research is critically important to investors, corporations and non-profits," he said, adding: "And the information that primary research yields is more effective and safer when done on the grid rather than off."
He was among the lawyers who helped the SEC ultimately bring a case against Texas financier Allen Stanford, who was eventually convicted of running a multibillion-dollar Ponzi scheme.
King was also involved in two high-profile probes into allegations of misconduct at Wal-Mart Stores Inc and Chesapeake Energy Corp.
Wal-Mart is facing allegations that its top executives covered up widespread bribery involving its Mexico operations, while Chesapeake is under scrutiny for a controversial program that granted former Chief Executive Aubrey McClendon a share in each of the natural gas producer's wells.
(Reporting by Sarah N. Lynch, editing by G Crosse)