U.S. Arrests 4 in Widening Hedge Fund Probe
Federal investigators on Thursday announced charges against four more people in the widening insider trading probe targeting so-called expert networks and some of the world’s biggest technology companies.
A fifth person has pleaded guilty in the probe, authorities said.
Among the four arrested and charged Thursday were an executive at expert network Primary Global Research of Mountan View, Calif., and three consultants for the network who worked at big, publicly traded global tech companies.
"Today’s charges allege that a corrupt network of insiders at some of the world’s leading technology companies served as so-called 'consultants' who sold out their employers by stealing and then peddling their valuable inside information,” Preet Bharara, U.S. Attorney for the Southern District of New York, said in a statement.
Arrested was Primary Global executive James Fleishman, 41, on wire fraud and conspiracy charges for allegedly conspiring to provide confidential information, including material, nonpublic information to Primary Global’s clients, including hedge funds.
Primary Global was not named in court papers released Thursday, but Fleishman is identified as working for the same firm that employed a person already charged in the investigation.
Also arrested were three employees of publicly trading companies: Mark Anthony Longoria, 44, a supply chain manager at Advanced Micro Devices (NYSE: AMD), Walter Shimoon, 39, a senior director of business development at Flextronics International (NASDAQ: FLEX); and Manosha Karunatilaka, 37, a business development manager at Taiwan Semiconductor North America (NYSE: TSM).
Shimoon, for example, is alleged to have provided “highly confidential” sales forecast information and new product features for Apple’s (NASDAQ: AAPL) iPhone to his contacts at Primary Global, as well as unreleased information on the iPad. Flextronics is a supplier to Apple.
All face charges of wire fraud and conspiracy to commit securities fraud and wire fraud charges in connection with their employment as consultants for the firm.
Thursday’s arrests stem from a three-year investigation into the murky relationships between consultants, investment bankers, hedge-fund and mutual-fund traders, and analysts across the U.S.
The court papers released Thursday said Shimoon, Longoria and Karunatilaka were hired as consultants for the expert networking firm, which helps put hedge funds in contact with industry executives and consultants.
A fourth consultant, Daniel Devore, a global supply manager at Dell Inc. (NASDAQ: DELL), pled guilty to wire fraud and conspiracy to commit wire fraud on Dec. 10, according to federal prosecutors.
One person had already been charged in the growing scandal. Primary Global executive Don Chu, 56, of Somerset, N.J., was charged last month with illegally arranging for executives at publicly-traded companies to provide inside information to the firm’s hedge fund clients in order to give traders a step up on their competition, according to the statement.
Several prominent hedge funds and large mutual fund companies – including Wellington Management and Janus Funds (NYSE: JNS) -- have reportedly been contacted or subpoenaed by federal investigators. Janus has since issued a statement saying the government has confirmed that Janus is not a target of the investigation.
Primary Global was drawn into the probe by a former hedge-fund trader, Richard "C.B." Lee, who began cooperating with prosecutors in April 2009 after he was ensnared in the investigation into insider trading at large hedge fund company Galleon Group.