Karl Motey, an independent consultant in California, pleaded guilty and agreed to cooperate with federal prosecutors in a widening U.S. investigation of insider trading on Wall Street.
Motey pleaded guilty in federal court in Manhattan on Dec. 14 to conspiracy and securities fraud, according to court papers made public today. He got secret tips from multiple sources at Marvell Technology Group Ltd. and provided the information to hedge fund clients, according to the charging document.
Motey agreed to tell prosecutors about an insider trading scheme that ran from 2007 to March 2009, court papers show. He will also disclose details of tips that he got from a source at Taiwan-based United Microelectronics Corp. and from “employees of a hedge fund located in California,” according to court records.
An accomplice who isn’t identified “provided inside information to Karl Motey” about “Marvell and Marvell’s customers,” according to the criminal information.
Liu Chitung, Hsinchu, Taiwan-based UMC’s chief financial officer, said he hadn’t heard of the case and hadn’t been contacted by U.S. authorities. The company has tight controls over its internal information, he said.
Tate Tran, a spokeswoman for Marvell, didn’t immediately return voice-mail messages left on her work and mobile phones today. Lee Altshuler and Alexandra Shapiro, lawyers for Motey, didn’t return phone calls seeking comment.
Motey is listed in California state records as agent for Los Altos-California-based Coda Group Inc., which was formed in 2000. A message left at his home wasn’t returned.
Marvell, based in Hamilton, Bermuda, makes processors that run smartphones. United Microelectronics is the world’s second-largest contract chip manufacturer.
Prosecutors last week announced insider trading charges against four people who worked at technology firms and a fifth man, James Fleishman, who worked at an expert networking firm, Primary Global Research LLC. Of those five, Daniel DeVore, former a global supply manager at Dell Inc., pleaded guilty and is cooperating with prosecutors.
According to last week’s complaint, prosecutors had the assistance of four others besides DeVore. The Wall Street Journal reported on Dec. 20 that Motey was one of them. He is identified in those court papers as “CW-2.”
In last week’s complaint, prosecutors said they taped a phone call between “CW-2,” who was then cooperating with the government, and Fleishman, whose job at Primary Global was to put traders in contact with so-called experts working at public companies.
“During the call, CW-2 provided Fleishman with a list of things that CW-2 wanted to learn from a consultation call about Marvell, including whether Marvell had obtained a ‘design win’ at Western Digital and Seagate,” the complaint said, referring to Western Digital Corp. and Seagate Technology Plc.
A design win is when a technology company has decided to use the product of another company in its products.
Since October 2009, federal prosecutors in New York have brought charges against about two dozen hedge fund traders, corporate insiders, expert networking executives, and lawyers as part of a broadening crackdown on insider trading. At least 16 have pleaded guilty. Like Motey, many have agreed to help the government in exchange for leniency. When he is sentenced, Motey faces as many as 25 years in prison, prosecutors said.
Among those charged in the insider trading probe is Raj Rajaratnam, co-founder of Galleon Group LLC. He faces a trial in February and denies wrongdoing.
The case is U.S. v. Motey, U.S. District Court, Southern District of New York (Manhattan).