A federal appeals court has upheld the conviction of Winifred Jiau, a California technology consultant who prosecutors said used code language to disguise an insider trading scheme in which she gave live lobsters and other gifts in exchange for nonpublic information.
Jiau, 46, is the first consultant criminally convicted in a broad U.S. insider trading sweep unveiled four years ago.
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The 2nd U.S. Circuit Court of Appeals in New York on Wednesday rejected Jiau's arguments that her securities fraud and conspiracy conviction was improperly based on illegal wiretaps and a lack of evidence that her tippers personally benefited from their disclosures.
It also upheld Jiau's four-year prison sentence but threw out a $3.12 million forfeiture order, citing an interim decision in an unrelated case. The appeals court suggested that the sum should be reduced, and directed a lower court to recalculate it.
Jiau, a Taiwan native and former consultant at Primary Global Research, has been incarcerated since her December 2010 arrest for passing tips about financial results of chipmakers Marvell Technology Group Ltd and Nvidia Corp to hedge fund managers from 2006 to 2008.
Randa Maher, a lawyer for Jiau, said she expected the ruling on the forfeiture order, and that her client will review her options on the remainder of the 2nd Circuit decision.
Jennifer Queliz, a spokeswoman for U.S. Attorney Preet Bharara in Manhattan, declined to comment.
RECIPES FOR PROFIT
Known as Wini, Jiau was convicted in June 2011 after prosecutors said she gave tips to hedge fund managers Samir Barai of Barai Capital Management and Noah Freeman of Sonar Capital Management and later SAC Capital Advisors LP.
Prosecutors said hedge funds paid the Fremont, California. resident $208,000 for her tips, which resulted in more than $3 million of illegal profit.
Jurors at the Manhattan trial heard evidence that Jiau referred to her Marvell and Nvidia sources as "cooks," to money as "sugar," and to nonpublic information as "recipes."
Jiau argued on appeal that U.S. District Judge Jed Rakoff had erred at trial in admitting recordings of phone conversations with those she tipped off, as well as transcriptions that Barai, who was hard of hearing, had requested.
She also said her tippers did not personally benefit from the conspiracy despite having received nonfinancial benefits from her, such as restaurant meals, an iPhone and the lobsters.
Circuit Judge John Walker, however, rejected these claims in a decision for the three-judge appeals court panel.
He said the recordings were admissible under Title III of the Omnibus Crime Control and Safe Streets Act of 1968 because they were made to help Barai understand them, not to blackmail or otherwise harm Jiau.
Walker also said the gifts that Jiau provided her tippers created "quid pro quo" relationships sufficient to show that they personally benefited from dealing with her.
More than 70 people have been convicted or pleaded guilty in the insider trading probe. Jiau's trial was the first to focus on expert networking firms, which match industry experts with money managers seeking information about industries.
Barai and Freeman pleaded guilty, as did Jiau's tippers, Stanley Ng of Marvell and Son Ngoc "Sonny" Nguyen of Nvidia.
Galleon Group hedge fund founder Raj Rajaratnam and former Goldman Sachs Group Inc director Rajat Gupta are among those convicted in the broader probe.
Jiau is separately pursuing a malpractice lawsuit against her trial lawyers, who worked at Morgan, Lewis & Bockius.
Last month, U.S. District Judge Paul Engelmayer in Manhattan said she could not sue roughly 400 partners at the firm, but only those who worked on her case or supervised them.
Jiau is housed at a low-security facility in Dublin, California, roughly 35 miles southeast of San Francisco. She may be released as soon as June 2014.
The case is U.S. v. Jiau, 2nd U.S. Circuit Court of Appeals, No. 11-1467.
(Reporting by Jonathan Stempel in New York; Editing by Lisa Von Ahn and Ken Wills)