Expert-Networking Insider Trading Trial to Enter Jury Deliberation Phase
By Patricia Hurtado – Sep 20, 2011 12:01 AM ET
A federal jury in New York is set today to begin deliberating the fate of James Fleishman, an ex- Primary Global Research LLC executive charged with helping pass confidential information as part of an insider-trading scheme.
Fleishman, of Santa Clara, California, is charged with conspiracy to commit securities fraud and conspiracy to commit wire fraud. He pleaded not guilty and faces as long as 25 years in prison if convicted.
Prosecutors allege that Fleishman, as a salesman for the firm, obtained and passed confidential data from employees at technology companies who were moonlighting as consultants for Mountain View, California-based Primary Global, also known as PGR. The secret tips were given to fund managers who paid Primary Global for consultation calls, prosecutors said.
“He knew confidential information was being passed repeatedly to members of the investment community,” Assistant U.S. Attorney David Leibowitz told jurors in closing arguments yesterday. “He not only knew it, he helped make it happen.”
Leibowitz said the scheme involved “people who used an expert networking firm to traffic in confidential business information to get an illegal inside edge.”
Dozens of E-Mails
He cited dozens of e-mails Fleishman sent and phone conversations he had with cooperating witnesses who were secretly recorded by the Federal Bureau of Investigation. The prosecutors also cited the testimony of three employees of technology companies who cooperated with the U.S. and testified during the trial.
Primary Global matches investors with specialists who provide insight into specific markets. Fleishman earned more than $800,000 from 2008 to 2010, according to records shown by the U.S. Consultants were paid as much as $300 per call with some earning as much as $200,000, the government said.
In his closing argument yesterday, Ethan Balogh, a lawyer for Fleishman, said there was no evidence his client knew that consultants were violating compliance agreements with their employers.
Balogh said Fleishman relied on the expert networkers’ own representations about their ability to do consulting outside their companies. He also cited an agreement the consultants signed and submitted to Primary Global confirming they had permission to do such consulting and agreeing not to pass confidential information during calls.
The defense attorney said the technology company insiders who testified for the prosecution were secretive about their criminal activities and that Fleishman had no idea whether some consultants he recruited crossed a line and passed confidential data to fund managers.
“He did not agree with anybody to steal information,” Balogh said. “He did not intend that any PGR consultant would violate their agreement with their employer to not provide confidential information.”
Among those who testified against Fleishman was Bob Nguyen, a former Primary Global analyst who pleaded guilty and said he knowingly passed confidential company information to Fleishman from consultants.
Others who testified for the U.S. during the 2 1/2-week trial were Daniel Devore, a former global-supply manager of Round Rock, Texas-based Dell Inc. (DELL); Mark Anthony Longoria, a former Advanced Micro Devices Inc. (AMD) manager; and Steven Hwang, an ex-Samsung Electronics Co. employee. All pleaded guilty.
Apple IPad Data
Hwang testified that during a December 2009 lunch in California with Fleishman and a fund manager, he passed confidential shipping data for Apple Inc. iPad components, four months before the iPad made its U.S. debut.
Since November, 15 people have been charged by federal prosecutors in the office of Manhattan U.S. Attorney Preet Bharara in a probe of expert networkers and fund managers. Twelve have pleaded guilty, including Noah Freeman, a former portfolio manager with SAC Capital Advisors LP, and Samir Barai, the founder of Barai Capital Management LP.
Winifred Jiau, a former Primary Global consultant, was convicted at trial in June of securities fraud and conspiracy. Fleishman is the second to go to trial.
The case is U.S. v. Nguyen, 11-CR-32, U.S. District Court, Southern District of New York (Manhattan).
To contact the reporter on this story: Patricia Hurtado in New York at firstname.lastname@example.org
To contact the editor responsible for this story: Michael Hytha at email@example.com