Former Credit Suisse Group (CSGN) banker Hafiz Muhammad Zubair Naseem gained access to confidential documents so he could leak secret tips about pending deals, a prosecutor told jurors at the start of an insider-trading trial.
Assistant U.S. Attorney Josh Klein told jurors in Manhattan federal court that Naseem tipped off Ajaz Rahim, former head of investment banking for Faysal Bank Ltd. (FABL) in Karachi, Pakistan, before pending deals. Naseem, a Pakistani citizen who worked at the New York office of Zurich-based Credit Suisse, faces more than 30 years in prison if he's convicted.
``The defendant is the only link between Credit Suisse, which was involved in all of these deals, and Rahim,'' Klein told jurors.
The trial is the first insider-trading case to go before a jury since the government began a series of such prosecutions this year. Much of the government's evidence involves well-timed telephone calls between Naseem and Rahim. The case may test whether regulators, hunting for patterns of trades, may rely on circumstantial proof to win convictions.
``It's a very important trial,'' said John Olson, a securities lawyer at Gibson, Dunn & Crutcher in Washington. ``If they don't win this case, that doesn't mean they won't try another, but it'll probably mean they change their strategy on proof.''
Defense lawyer Michael Bachner is scheduled to give his opening statement later today. He's said he'll tell jurors that Rahim relied on public information for his trades. Rahim is fighting extradition from Pakistan after being charged in the case and won't be in court.
Prosecutors say Naseem fed tips to Rahim on a $32 billion buyout bid for TXU Corp. -- later renamed Energy Future Holdings Corp. -- and eight others in which the bank was an adviser.
The tips began in April 2006, soon after Naseem began working on a team of Credit Suisse energy bankers, prosecutors contend. He called Rahim before deals involving TXU, Hydril, Trammell Crow Co., John H. Harland Co., Energy Partners Ltd. (EPL), Veritas DGC Inc., Jacuzzi Brands Inc., Caremark Rx Inc. and NorthWestern Corp. (NWE), the government claims.
The U.S. Securities and Exchange Commission has filed a related civil lawsuit against Naseem, who lives in Rye Brook, New York.
Last week, a former Morgan Stanley (MS) vice president and her husband, an ex-ING Investment Management analyst, were sentenced to 18 months in prison after pleading guilty to insider trading charges.
In November, a former Bear Stearns Cos. broker became the ninth person to plead guilty in a wide-ranging insider case that also involved UBS AG (UBSN) and Morgan Stanley, and in August an ex- Goldman Sachs Group Inc. associate pleaded guilty to making more than $6.7 million through illegal trades.
The case is U.S. v. Naseem, 07-cr-610, U.S. District Court, Southern District of New York (Manhattan).