The jury at the insider-trading conspiracy trial of former Primary Global Research LLC executive James Fleishman heard the defendant’s voice for the first time on a secretly recorded phone call made by a cooperating witness.
Fleishman, of Santa Clara, California, is charged with two counts of conspiracy for his role in what prosecutors say was an scheme to pass tips from technology company employees, acting as consultants, to hedge-fund managers. As a salesman for Primary Global, Fleishman put consultants in touch with investors. He faces as long as 25 years in prison if convicted.
Karl Motey, 47, an independent consultant who has pleaded guilty to insider trading and is cooperating with the U.S., said he called Fleishman in May 2009 claiming he was starting a hedge fund and wanted to use Primary Global’s services.
“You’re accessing our networking of contacts to get information from them, you know kind of to prove or disprove your model,” Fleishman can be heard saying on the call. “Talking to them, uh, so they can be a resources for you.”
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.
Motey asked Fleishman if he could get specific information about technology companies, not just industry trends.
“It depends who you’re talking to,” Fleishman said. “In Taiwan, who are seeing stuff on a day-to-day basis that can say ‘Hey, here’s how things are kind of shaping up for June.’”
Motey told jurors he was surprised by Fleishman’s statement because late May or early June is a period just before companies issue quarterly earnings.
Assistant U.S. Attorney David Leibowitz asked Motey what he understood Fleishman to be saying.
“I took it to mean that they had people who’d be able to give me daily updates on a particular company, even on a day-to-day basis,” Motey said.
Fleishman also said consultants last names weren’t given out to clients or their contact information.
“You just try to provide anonymity to some degree for the experts,” Fleishman said.
“That’s just to protect them from investor relations?” Motey said.
‘Us and Them’
“Yeah, because the relationship we have is between us and them,” Fleishman replied.
Leibowitz asked Motey what he understood Fleishman to mean.
“What I meant was in my experience, investor relations keeps a very tight control over who gets to talk and what message gets out,” he said. “Investor relations would not want employees to be talking to investors.”
Jurors also heard a call Motey recorded later in May 2009, in which he had his first consultation with a Marvell Technology Group Ltd. employee whom Primary Global described as a director of the company’s business development and marketing.
In the call, the consultant can be heard telling Motey his revenue expectations for Marvell as well as the average gross margin for his business unit.
Leibowitz asked Motey what his reaction was to hearing the information.
“I was very surprised,” Motey testified. “That’s not a public number for the company as far as I knew at the time.”
Jay Nelson, one of Fleishman’s lawyers, told jurors yesterday that his client wasn’t aware of any wrongdoing at the company and hadn’t committed any crimes. Nelson said that of the 15,000 experts in the network, only a handful were “rogue.” Cooperating witnesses were testifying for the prosecution in a bid to win leniency from the court, he said.
Thirteen people, including 12 who pleaded guilty, have been convicted in the crackdown by Manhattan U.S. Attorney Preet Bharara,.
Testimony continues today before U.S. District Court Judge Jed Rakoff.
The case is U.S. v. Nguyen, 11-cr-00032, U.S. District Court, Southern District of New York (Manhattan).