Whitman Lawyer Challenges Motey’s Trial Testimony on Inside Tips

A lawyer for Whitman Capital LLC founder Doug Whitman tried to undermine the testimony of a government witness who testified that he passed inside information about Marvell Technology Group Ltd. (MRVL) revenue to Whitman.

Karl Motey, a former computer-chip industry analyst, testified at Whitman’s criminal trial that he got detailed non- public information about Marvell’s revenue figures from two sources inside the company and shared them with his clients, including Whitman. He told jurors that Whitman knew the information was illicit.

A defense lawyer cross-examined Motey today, trying to show that Whitman thought the information he was getting from Motey wasn’t confidential because it had been widely disclosed. Motey agreed with the lawyer, David Rody, that he told Whitman that “Marvell was leaky.”

Motey, one of the government’s two key witnesses, testified for a second day in Whitman’s trial in Manhattan federal court. Prosecutors claim Whitman used inside information from Motey and from Roomy Khan, a former Intel Corp. (INTC) executive, to make almost $1 million for his Menlo Park, California-based hedge fund.

The trial is part of a broad government investigation of insider trading involving hedge funds. Since August 2009, at least 70 people have been charged with illegal trading by the office of U.S. Attorney Preet Bharara. More than 60 have pleaded guilty or been convicted at trial.

Motey pleaded guilty in 2010 to conspiracy and securities fraud. He told jurors yesterday he’s testifying in hopes of avoiding a prison sentence.

Research Reports

Rody showed Motey copies of research reports he published on companies in the semiconductor industry, including Marvell, before the time when Motey admits he was passing inside tips.

“Sources indicate MRVL’s storage segment remains strong,” one report from 2005 read, referring to Marvell’s ticker symbol.

Whitman’s lawyers have told U.S. District Judge Jed Rakoff, who is overseeing the trial, they are trying to show that the words “source” and “mole,” which Whitman is alleged to have used in discussing Motey’s contacts at Marvell, refer to sources of legitimate company information.

Rody also got Motey to agree that some of the information he got from his Marvell sources was inaccurate.

Marvell, based in Hamilton, Bermuda, makes computer chips that run smartphones and that are used in computer hard drives.

The case is U.S. v. Whitman, 12-cr-00125, U.S. District Court, Southern District of New York (Manhattan).

To contact the reporter on this story: Bob Van Voris in New York at rvanvoris@bloomberg.net

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

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