Karunatilaka Pleads Guilty in Expert-Networking Insider Case

Manosha Karunatilaka, a former account manager at Taiwan Semiconductor Manufacturing Co., pleaded guilty to his role in an alleged insider-trading scheme involving expert-networking firm Primary Global Research LLC.

Primary Global “offered to pay me $200 per conversation” with it and its clients, Karunatilaka, 37, told U.S. District Judge Jed Rakoff in Manhattan yesterday. “I knew that some of the information I was sharing was nonpublic and confidential to TSMC.” He said he made a total of $35,000 from Primary Global and didn’t tell Taiwan Semiconductor about his arrangement.

The guideline range for Karunatilaka’s sentence is 37 to 46 months, according to the plea agreement. The judge set sentencing for Sept. 15.

“I’m here to take full responsibility for my actions,” Karunatilaka, of Marlborough, Massachusetts, told Rakoff.

The biggest U.S. insider-trading probe became public in 2009 with the arrest of Galleon Group LLC hedge fund co-founder Raj Rajaratnam, who was found guilty yesterday day by a jury in the same courthouse where Karunatilaka entered his plea.

Karunatilaka, a U.S. citizen born in Sri Lanka, was arrested Dec. 16. He pleaded guilty to one count of conspiracy to commit wire and securities fraud.

Manhattan U.S. Attorney Preet Bharara, who is directing the nationwide probe, said his office has charged 47 people with insider-trading crimes during the past 18 months. About three dozen have been convicted, including three who pleaded guilty in late April.

Taiwan Semiconductor, based in Hsinchu, Taiwan, is the world’s largest contract manufacturer of chips.

‘Hardly Worth It’

Karunatilaka “thought he could moonlight for an expert networking firm and sell out his employer in the process,” Bharara said in a statement yesterday. “It should now be abundantly clear that his short-term financial gain was hardly worth it.”

Also charged in the case are James Fleishman, an executive for Mountain View, California-based Primary Global Research; Mark Anthony Longoria, who worked at Advanced Micro Devices Inc. (AMD); and Walter Shimoon, who worked at Flextronics International Ltd. (FLEX)

Expert-networking companies such as Primary Global match investors with specialists who provide insight into specific markets.

No Trial

“My client is eager to put this behind him,” Karunatilaka’s lawyer Brad Bailey said after the hearing. “He came in with a willingness to admit his guilt and spare the government the cost and expense of having a trial.” Bailey declined to say whether or not Karunatilaka is cooperating with prosecutors.

Fleishman, Longoria and Shimoon were released on bail Jan. 4. Fleishman entered a not guilty plea at his arraignment on Feb. 7. Longoria’s lawyer, Jonathan Marks, said in a phone interview on Feb. 28 that his client is in talks with prosecutors about a possible plea deal.

A fifth man, Daniel DeVore, formerly a supply manager at Dell Inc. (DELL), was arrested in the same probe and pleaded guilty Dec. 10 to wire fraud and conspiracy to commit securities and wire fraud, according to prosecutors.

The case is U.S. v. Shimoon, 10-mj-2823, U.S. District Court, Southern District of New York (Manhattan).

To contact the reporter on this story: Thom Weidlich in New York federal court at tweidlich@bloomberg.net.

To contact the editor responsible for this story: Michael Hytha at mhytha@bloomberg.net.

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