John Kinnucan, the research analyst who went public and told the investing world that he was a target in the government's massive probe of insider trading, now says that he's pretty certain that he's "guilty of something," but he's also pretty certain that he's the target of a government witch hunt that he says he will fight to the end.
"Oh, they'll spend all this money and get me on some technicality, but if I'm guilty of something, I'm guilty to the extent that if the government looks at anyone hard enough they can find them guilty of something," Kinnucan told the FOX Business Network in a wide-ranging interview this weekend, following news that he received a subpoena from the Justice Department demanding detailed client and personal information as part of its ever-expanding probe of insider trading.
Continue Reading Below
"I plan to fight this because someone has to take a stand and if it has to be me so be it," he said.
Kinnucan certainly isn't the only, or the most prominent, investment executive under scrutiny; also receiving subpoenas are some of the clients of his research, including large hedge-fund firms like SAC Capital, run by investing superstar Steve Cohen, and Citadel Investments.
The FOX Business Network has reported that Cohen's SAC is one of the primary targets of the probe. A spokesman for SAC says the firm has done nothing wrong.
But Kinnucan may be among the probe's most unusual targets because he has so far ignored the usual protocol of remaining quiet and referring questions to his attorney, and is instead mounting a very public campaign to attack the government's investigatory methods. He rocked the investment world when he alerted his clients that two FBI agents showed up at his home in Portland, Oregon, told him they had evidence that he may have passed on insider tips to his clients and then pressured him to wear a wire.
He then made numerous broadcast appearances detailing the FBI's investigatory techniques, some of which have angered officials at the FBI and the Justice Department, FOX Business has learned. On Friday, just days after refusing their offer and appearing on the FOX Business Network, Kinnucan told reporters that he received a subpoena from the Justice Department demanding information about the activities of his research firm, Broadband Research, as well as personal records like credit card bills.
FOX Business has confirmed that federal authorities, led by the lead prosecutor in the inquiry, US Attorney for the Southern District Preet Bharara, are focusing on Kinnucan's activities as part of their probe.
Kinnucan's response to it all that: Bring it on. "I almost welcome this challenge," Kinnucan says. "The last I checked we're a country of laws and rights," and its those rights that Kinnucan says are being violated.
Regulatory officials with knowledge of the government's inquiry say officials in the Justice Department are keenly interested in Kinnucan's work and are looking at whether he may have crossed the line from passing legitimate information to his clients into possibly dealing in "material, non-public" information, which is the definition of an illegal insider tip.
A spokesman for the FBI had no comment about either its interest in Kinnucan or details about the investigation. But Kinnucan says if he's guilty of insider trading "so is virtually everyone who works for an investment bank or a mutual fund in the United States." All the government has to do is look at all the trading in stocks of companies that are part of mergers and acquisitions before deals are announced, as well as research reports that telegraph important corporate events that move stocks.
"Am I guilty of insider trading? It depends on how you define insider trading," he adds. If talking to the gal at the Starbucks (NASDAQ:SBUX) about coffee sales and sharing it with others means I'm guilty of insider trading well then I'm guilty and so is everyone else on Wall Street. And if that's the case, they don't need to put a wire on John Kinnucan to find this evidence. Just pick up a newspaper or a Wall Street research report."
Still, Kinnucan says that what he believes are the heavy handed tactics of the FBI -- namely showing up to his home and offering to play wiretapped recordings of his conversations with clients, prodding him to clandestinely tape his clients, and then after he refused, serving him with a subpoena all in front of his family -- has him worried.
He says that he's finally having discussions with an attorney who, if hired, may put a stop to Kinnucan's public campaign to clear his name. As a result, he says he has to cancel an appearance with FOX Business scheduled for tomorrow afternoon to discuss the case.
"If they want to get you bad enough, I'm sure they can do it," Kinnucan said, adding that the government's interest in his business activities is similar to an incident from his youth when he was 16 years old.. Kinnucan says he grew up poor "on welfare in one of the richest towns in the country," Lake Forest, Ill., an affluent suburb of Chicago. One day, he was driving a "beat-up pickup truck in a town of BMWs," and was pulled over by the police who were certain he was up to no good. After detaining him for four hours, all they could get him on was some trivial violation (failure to carry flares in a truck, he says), which he fought to the end.
"I remember telling the judge, 'your honor, maybe I have too much faith in law enforcement, but the police should know the difference between what I've done and a real crime.'" Kinnucan said the judge agreed with him and let him off.
Now he's planning a similar defense and hoping for a similar outcome, even if the stakes are higher. Kinnucan says he's lost nearly all his clients and doesn't have the resources to hire a high- priced attorney. Like he did back when he was a teenager, Kinnucan said he initially attempted to defend himself because the attorneys who have approached him are "bloodsuckers who say they are friends with Preet and want to charge me 500K just to talk to them. If this goes to trial, it will be multiple millions more to make this go away."
One of the difficulties in defending himself became evident when he attempted to contact one of his clients, Citadel Investments general counsel John Nagel, for information, and received a curt response from Citadel's outside counsel, a copy of which was reviewed by FOX Business. The outside counsel. David Brodsky of Cleary Gottlieb Steen & Hamilton LLP, wrote back that "given the circumstances I think it is advisable that we communicate through your counsel. Please let me know who is representing you in this matter and, in the meantime, please refrain from any further direct contact with Mr. Nagel or any other Citadel employee."
"Just to let you know," Kinnucan wrote back, "I have unfortunately lately become acquainted with the scummy racket of which you are part and parcel, that of course being the Federal kleptocracy, wherein carpetbaggers such as yourself profit from the predations of your erstwhile colleagues in the Federal government. I for one don’t plan to participate. I will be representing myself in court, if it comes to that. Much better to spend my life in jail than make payoffs to you and your ilk. Meanwhile, best of luck to you. I think you will need it. Regards, John Kinnucan."
Brodsky didn't return an email and telephone call for comment. A spokeswoman for Citadel had no comment.
On Friday, Kinnucan called the US Attorneys office for other records, and on Monday if he's still representing himself, he says he plans to make additional calls to government officials investigating the case. "I'm going to call them and say, 'I'm John Kinnucan, representing John Kinnucan and here's some of the documents I want from you guys,'" he said.
He will also alert them that he wants to take depositions of government officials involved in the probe, and he's starting at the top.
"First person I'm going to depose is Preet," he said, but he says he also has plans to call other senior Justice Department people involved in the probe. "I'm sure there are people out there who think I'm some big guy, but in reality me and my family live month to month," he said. "That's why I have had to defend myself in the court of public opinion."