Don Ching Trang Chu, a former consultant at Primary Global Research LLC, avoided prison with a sentence of two years probation for passing confidential information to the expert-networking firm’s hedge fund clients.
Chu, 57, pleaded guilty in June to conspiracy to commit securities fraud and conspiracy to commit wire fraud. He was the Taiwan liaison for Mountain View, California-based Primary Global, which links investors with industry experts at public companies, before he was arrested in November.
Chu, who is cooperating with prosecutors, admitted to being present at meetings between Primary Global’s clients and technology-company employees who moonlighted as consultants for the firm. In the meetings, the consultants disclosed material, non-public information, Chu said during his guilty plea.
U.S. District Judge Jed Rakoff said during yesterday’s sentencing in Manhattan that jail wasn’t warranted for Chu because of his “minimal” role in the scheme. Chu had faced as long as six months in prison.
“Your honor, I am extremely sorry for what I have done,” Chu told Rakoff before being sentenced. “I have had nightmares since last November. I will make sure I don’t repeat the same mistakes and ask your honor to forgive me.”
Chu had said the inside information he disclosed was shared with former SAC Capital Advisors LP portfolio manager Noah Freeman and Sam Barai, founder of Barai Capital Management LP. Both have pleaded guilty. Chu said he knew fund managers intended to use the secret tips to buy securities.
Chu was accused in connection with one of three alleged overlapping insider-trading rings that included Galleon Group LLC co-founder Raj Rajaratnam. Prosecutors said Chu facilitated a conversation in July 2009 between Richard Choo-Beng Lee, a former partner at San Jose, California-based Spherix Capital LLC, a Primary Global client, and an unidentified employee of a publicly traded technology company.
Lee pleaded guilty and is cooperating with the government, along with his partner, Ali Far. Chu signed an agreement that required him to cooperate with prosecutors, Rakoff said at the time of Chu’s guilty plea.
Federal guidelines called for Chu to get no jail time at all up to as long as six months in prison. The probation department recommended that Chu be sentenced to only a term of probation.
“The defendant did not financially benefit from this conduct and otherwise has had a clear record,” Rakoff said. “I find this to be one of the very rare instances where the guidelines range is reasonable.”
“There is just no doubt that this is a serious crime that needs general deterrence,” he said. “But, his role was so minimal compared to other defendants, so I am persuaded to agree and impose a sentence of two years’ probation.”
Assistant U.S. Attorney David Leibowitz said in court that “it’s the government’s position that any sentencing that’s within the guidelines is admissible.”
Rakoff agreed to allow Chu to travel to Taiwan to take care of his mother, 81, and father, 85.
“I am eager to rebuild my reputation and my honor as before,” Chu told Rakoff. He said he was anxious to take care of his parents and to “devote my time to charity and life’s work.”
James DeVita, Chu’s lawyer, asked in court papers for a probationary term that would allow the naturalized U.S. citizen to travel home to Taiwan and pursue employment.
Chu joined Primary Global in 2004 and helped the company establish a Taiwan office, DeVita said in court papers. Chu initially believed that the firm’s actions were “legal and above board” and didn’t learn that Primary Global employees weren’t abiding by prohibitions against passing confidential information to clients until after he began carrying out supervisorial duties, DeVita said.
Chu, of Somerset, New Jersey, declined to comment after court yesterday.
“Mr. Chu is glad to have this behind him and to be getting back into the good graces of society and of his family,” DeVita said.
The case is U.S. v. Chu, 1:11-cr-00032, U.S. District Court, Southern District of New York (Manhattan).