The insider-trading conspiracy trial of former Primary Global Research LLC executive James Fleishman began today with a prosecutor telling jurors they will hear from four people who’ve pleaded guilty to the alleged plot.
Fleishman, of Santa Clara, California, is charged with two counts of conspiracy for his role in what prosecutors say was an scheme in which technology company employees working as consultants passed secret tips to hedge fund managers. Fleishman, who has pleaded not guilty, faces as long as 25 years in prison if convicted.
“Greed and deception, this is a case about stock traders on Wall Street getting an illegal edge so they can make money,” Assistant U.S. Attorney Antonia Apps told the Manhattan jury today. “And the man who put these traders together with company insiders was the defendant, James Fleishman.”
Apps said her witnesses include two technology company employees who’ve pleaded guilty to taking part in the insider- trading scheme, Mark Anthony Longoria, a former Advanced Micro Devices Inc. manager, and Daniel DeVore, a former supply manager for Dell Inc.
Bob Nguyen, a former Primary Global manager, will also testify for the government and describe for jurors how Primary Global worked, Apps said. Karl Motey, an independent consultant who has pleaded guilty, will testify he wore a body wire and recorded conversations with Fleishman. The jury will also hear court-authorized wiretapped recordings the U.S. made of analysts speaking with fund manager clients as they passed illegal tips, Apps said.
DeVore pleaded guilty in December to wire fraud and conspiracy. Longoria pleaded guilty in June to conspiracy, securities fraud, wire fraud and making false statements to federal agents and prosecutors. Nguyen pleaded guilty in January to conspiracy and fraud.
Thirteen people have been convicted in the crackdown, including 12 who pleaded guilty. Winifred Jiau, a former Primary Global consultant was convicted at trial in June of securities fraud and conspiracy for passing inside tips about Nvidia Corp. and Marvell Technology Group Ltd. to hedge fund managers.
Primary Global, based in Mountain View, California, links investors with industry experts at public companies. In his position as a sales manager, Fleishman was responsible for attracting new clients and arranging for fund managers to speak to consultants, the U.S. said.
Apps said Fleishman “both learned and passed illegal inside information directly to the traders knowing they’d use it.”
“Why did he do it?” she said. “He did it for the money; the defendant earned hundreds of thousands of dollars in commissions for his role.”
‘Handful Were Rogue’
Jay Nelson, one of Fleishman’s lawyers, told jurors today that his client wasn’t aware of any wrongdoing at the company and hadn’t committed any crimes.
“Of the 15,000 people experts in Primary Global’s network, only a handful were rogue,” Nelson said. “They stole confidential information and committed violations. James Fleishman did not know them. Mr. Fleishman believed that PGR was a good company and that the consultants were acting properly.”
Nelson asserted that the cooperating witnesses were testifying for the government because they were attempting to win leniency from the court.
“Mr. Fleishman truly believed that PGR was being run honestly and truthfully at all times,” he said.
Prosecutors said in court papers before trial that the conspiracy included at least five others. Unni Narayanan, Primary Global’s chief executive officer, and Phani Saripella, its chief operating officer, were identified as “co-conspirators” in the insider-trading scheme, prosecutors said. They haven’t been charged criminally.
After court today, defense lawyer Ethan Balogh asked U.S. District Judge Jed Rakoff to grant his request to give limited immunity from prosecution for Saripella, whom the attorney said he will likely call as a witness. Balogh said Saripella could contradict Nguyen’s version of how Primary Global operated. Rakoff didn’t rule on the request.
Priya Chaudhry, Saripella’s lawyer, didn’t immediately return a voicemail message left at her office seeking comment.
Prosecutors said the information passed included companies such as Advanced Micro Devices, Flextronics International Ltd., Apple Inc. and Dell.
Focus of Probe
Primary Global was the focus of a probe by Manhattan U.S. Attorney Preet Bharara’s office and the FBI dating back to 2008, court records show. For seven months in 2009 and 2010, five different federal judges in New York authorized wiretaps of telephone lines used by Primary Global. Rakoff has rejected a bid by Fleishman to bar the government from playing wiretaps of more than 100 calls to the company’s conference lines at the trial.
Motey, 47, took the stand late today as the government’s first witness and testified he agreed to begin cooperating with the U.S. after he was caught passing tips about two technology companies to hedge fund managers. His testimony continues tomorrow.
The case is U.S. v. Nguyen, 11-cr-00032, U.S. District Court, Southern District of New York (Manhattan).