Karl Motey, a former technology stock analyst who testified for the government in two insider-trading trials and secretly recorded more than 400 conversations for the FBI in New York, was sentenced to time served for his cooperation.
Motey, 48, “played a pivotal role” in the government’s investigation of the expert networking firm Primary Global Research LLC, known as PGR, posing as a hedge fund manager who sought illegal tips from company insiders, prosecutors in the office of U.S. Attorney Preet Bharara in Manhattan said in a Jan. 28 letter to U.S. District Judge Jed Rakoff, who presided over the case.
Motey testified at the insider trading trials of Doug Whitman, the founder of Whitman Capital LLC, and James Fleishman, a former PGR executive. Both men were convicted after trials in federal court in Manhattan.
“The past four years have been the most shameful and difficult of my life,” he told the judge just before the sentence was imposed. “I sincerely apologize for my mistakes. I’ve learned a hard and important lesson that will stay with me all of my life.”
Rakoff, who saw Motey testify twice on behalf of the government, said the brief period that he spent in U.S. custody on the day he pleaded guilty was sufficient. Rakoff also ordered him to serve one year of supervised release and allowed Motey to travel in the U.S. for work as long as he gave prior notification to court officials.
“Mr. Motey is a particularly impressive cooperator and I think that he has shown that he has definitely learned his lesson,” the judge said before imposing sentence.
Working with the Federal Bureau of Investigation, Motey secretly recorded more than 400 phone calls and in-person conversations with more than 50 people in the government’s insider trading probe, the U.S. said.
Both Motey and his lawyer lawyer, Alexandra Shapiro, declined to comment after court.
Motey, who began to work for the U.S. on April 1, 2009, was key to the government winning court authorization to secretly wiretap PGR’s conference line, according to the prosecutors’ letter. Companies like PGR, a so-called expert networking firm, link investors with industry experts at public companies.
“The wiretap recordings of PGR clients -- analysts and portfolio managers at hedge funds and investment firms around the country -- have since led to numerous other significant insider trading prosecutions and ongoing investigations,” the prosecutors said in the letter to the judge.
Bharara’s office has charged and convicted more than 70 people with insider trading tied to the investigation, including portfolio managers who obtained nonpublic information from employees at technology companies moonlighting as consultants for such expert-networking firms.
Motey, who worked at sell-side investment firms before forming his own research consulting firm called the Coda Group, pleaded guilty in December 2010 to conspiracy and securities fraud. He admitted getting information from insiders at Marvell Technology Group Ltd. and United Microelectronics Corp. Motey and the government agreed that he made as much as $150,000 illegally.
He had faced a maximum of 20 years in prison on the securities fraud charge and five years for conspiracy.
In court papers, Shapiro asked Rakoff to sentence Motey to one year of probation.
Motey was approached by FBI agents on the street in April 2009 and immediately said he would work with the government, prosecutors said in the letter to Rakoff. His cooperation led directly or indirectly to 20 criminal convictions, they said.
Beginning in May 2009, Motey agreed to pose as the manager of a hedge fund who wanted to work with Primary Global, based in Mountain View, California. Working under FBI direction, Motey told Fleishman, a Primary Global sales representative, that he was seeking inside information from employees of technology companies, the government said.
“Touting PGR’s ability to secure valuable inside information in circumstances that would evade detection, Fleishman facilitated Motey’s communications with a series of company insiders who did, in fact, provide Motey with inside information,” the government said.
Motey spent so much time working with investigators that it became his full-time job, forcing his wife to return to work to support the family, prosecutors said.
He spent five days on the witness stand in 2011 testifying against Fleishman, who was convicted and sentenced to 30 months in prison.
During Fleishman’s trial, prosecutors played some of the recordings which Motey made for the FBI, including one in which Fleishman advised Motey he could get specific information on technology companies, not just industry trends. Motey told jurors he was surprised by Fleishman’s statement because companies wouldn’t normally disclose information during the time period just before they issued quarterly earnings.
They also heard Motey speak to a PGR consultant who was employed by Marvell Technology Group.
During the wiretapped call, the consultant can be heard telling Motey his revenue expectations for Marvell as well as the average gross margin for his business unit.
Motey also testified in the insider trading trial of Whitman, for whom he had worked as a consultant, telling jurors he passed illegal tips to Whitman about Marvell. Whitman was found guilty in August and sentenced on Jan. 24 to two years in prison.
The case is U.S. v. Motey, 10-cr-1249, U.S. District Court, Southern District of New York (Manhattan).