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Expert-Networking Executive Fleishman Convicted at Insider Trial

Former Primary Global Research LLC Executive James Fleishman
Former Primary Global Research LLC Executive James Fleishman. Photographer: Tony Avelar/Bloomberg

A former executive at expert-networking firm Primary Global Research LLC, James Fleishman, was convicted at trial of helping pass confidential information to fund managers as part of an insider-trading scheme.

Fleishman, of Santa Clara, California, was found guilty yesterday by a Manhattan federal jury of conspiracy to commit securities fraud and conspiracy to commit wire fraud. The jury deliberated for about six hours before reaching a verdict.

U.S. District Judge Jed Rakoff set sentencing for Dec. 21. Until then, Fleishman, who faces as long as 25 years in prison, remains free on bond. He and his lawyer, Ethan Balogh, declined to comment as they left the courthouse.

“We had enough evidence to find the defendant guilty of both counts,” said jury foreman Ben Stein, who works in the information-technology sector of a financial services business. “It was not easy, but we had lots of evidence.”

Since November, 15 people have been charged by federal prosecutors in the office of Manhattan U.S. Attorney Preet Bharara in a probe of expert networkers and hedge fund managers. Twelve have pleaded guilty, including Noah Freeman, a former portfolio manager with SAC Capital Advisors LP, and Samir Barai, the founder of Barai Capital Management LP.

Winifred Jiau

Fleishman, 42, was the second to go to trial. Winifred Jiau, a former Primary Global consultant who was convicted at trial in June of securities fraud and conspiracy, is scheduled to be sentenced today in Manhattan federal court.

Prosecutors said Fleishman obtained and passed confidential data from technology company employees who were moonlighting as consultants for Mountain View, California-based Primary Global. The secret tips were given to fund managers who paid Primary Global for consultation calls, prosecutors said.

“He knew confidential information was being passed repeatedly to members of the investment community,” Assistant U.S. Attorney David Leibowitz told jurors in closing arguments yesterday. “He not only knew it, he helped make it happen.”

Prosecutors cited dozens of Fleishman’s e-mails and his phone conversations with cooperating witnesses that were secretly recorded by the Federal Bureau of Investigation.

Paid for Calls

Primary Global matches investors with specialists who provide insight into specific markets. Fleishman earned more than $800,000 from 2008 to 2010, according to records shown by the U.S. Consultants were paid as much as $300 a call, with some earning as much as $200,000, the government said.

Juror John Velasco, 26, a loan manager from Westchester County, New York, said the secret FBI recordings were key evidence, especially that of Karl Motey. Motey, an independent consultant, wore a body wire and secretly recorded calls with Fleishman and expert networkers.

The jury also heard calls recorded by the FBI of Primary Global’s conference line in which consultants passed confidential information about technology companies to Motey.

“Some of the tapes were point blank, where the defendant is pretty much giving incriminating evidence,” Velasco said.

Balogh said Fleishman relied on the expert networkers’ own representations about their ability to do consulting outside their companies. He cited an agreement the consultants signed and submitted to Primary Global confirming they had permission to do such consulting and agreeing not to pass confidential information during calls.

Confidential Information

Bob Nguyen, a former Primary Global analyst who pleaded guilty, testified that he knowingly passed confidential company information to Fleishman from consultants.

Others who testified for the U.S. during the 2 1/2-week trial were Daniel Devore, a former global-supply manager of Round Rock, Texas-based Dell Inc.; Mark Anthony Longoria, a former Advanced Micro Devices Inc. manager; and Steven Hwang, an ex-Samsung Electronics Co. employee. All except Hwang pleaded guilty to passing confidential information to fund managers during Primary Global consulting calls.

Hwang testified that during a December 2009 lunch in California with Fleishman and a fund manager, he passed confidential shipping data for Apple Inc. iPad components, four months before the iPad made its U.S. debut.

The case is U.S. v. Nguyen, 11-cr-32, U.S. District Court, Southern District of New York (Manhattan).

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