A former Flextronics International Ltd. (FLEX) executive, pleading guilty in a nationwide insider trading probe, admitted he passed inside information while working as a consultant to two expert networking firms.
Walter Shimoon, 39, pleaded guilty yesterday in federal court in Manhattan to two counts of conspiracy and one count of securities fraud. Shimoon told U.S. District Judge Jed Rakoff that he passed illegal tips while working as a consultant for Primary Global Research LLC and Broadband Research LLC.
Shimoon faces as long as 30 years in prison at his sentencing, scheduled for July 8, 2013. Rakoff told Shimoon, who is cooperating with prosecutors, that the sentencing may be moved to an earlier date.
In questioning by Rakoff, Shimoon said he had passed tips about a Flextronics supplier, OmniVision Technologies Inc. (OVTI), to a man named “Nick,” who worked for one of Primary Global’s hedge fund clients. Assistant U.S. Attorney Antonia Apps identified that man as Nicholas Caputo of Kingdom Ridge Capital LLC, an asset management firm in White Plains, New York.
Caputo, who hasn’t been charged with wrongdoing, didn’t immediately return voice-mail messages and e-mails to his office after regular business hours yesterday.
Kingdom Ridge said in an e-mailed statement that it has always complied with relevant laws, rules and regulations.
In a plea agreement signed by Shimoon, prosecutors said he provided illegal tips to Primary Global and its clients from mid-2008 to 2010.
Shimoon told Rakoff he was paid $200 an hour, for a total of $18,000, for his work for Primary Global. He passed illegal tips involving Flextronics, OmniVision and Apple Inc. (AAPL), according to prosecutors.
Shimoon also admitted passing inside information while working for Broadband Research, for which he was paid a total of $27,500. In the plea agreement, prosecutors said he provided inside information to Broadband Research, to the firm’s founder and principal, John Kinnucan, and to Broadband Research clients.
Prosecutors said Shimoon, as a Broadband Research consultant, passed confidential information about Flextronics, OmniVision, Apple and Cisco Systems Inc. (CSCO)
Nathaniel Burney, a lawyer for Kinnucan, said his client didn’t do anything wrong. Kinnucan hasn’t been charged.
Kinnucan, whose Portland, Oregon-based firm provides research on technology companies to hedge funds and mutual funds, told clients in October that federal officials had asked him to secretly tape a conversation with a fund manager whom he didn’t name. Kinnucan said at the time that he refused to cooperate.
‘Blessed’ by SEC
Kinnucan said yesterday in a phone interview that he didn’t pass illegal information to his clients.
“The kind of information I provided to my clients is exactly what is provided by the large investment banks,” Kinnucan said. “These practices have been blessed by the SEC.”
Kinnucan said he didn’t cover Flextronics for his clients. He said he has e-mails from clients saying the information Shimoon provided on Apple and OmniVision was “worthless.”
“They were saying Walter Shimoon doesn’t know what he’s talking about,” Kinnucan said. “It’s a joke.”
Shimoon was arrested in December with three other defendants. Also charged with Shimoon were former Primary Global executive James Fleishman; Mark Anthony Longoria, who worked at Advanced Micro Devices Inc. (AMD); and Manosha Karunatilaka, a former account manager at Taiwan Semiconductor Manufacturing Co.
Longoria and Karunatilaka have pleaded guilty. Fleishman is scheduled to be tried next month on two counts of conspiracy.
In a parallel lawsuit, the U.S. Securities and Exchange Commission alleged Shimoon spoke with people from at least 11 hedge funds over 14 months and leaked stock tips to some of them.
Winifred Jiau, a former Primary Global consultant, was convicted of securities fraud and conspiracy June 20 in Manhattan federal court.
The case is U.S. v. Shimoon, 10-mj-2823, U.S. District Court, Southern District of New York (Manhattan).
To contact the editor responsible for this story: Michael Hytha at firstname.lastname@example.org