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Kinnucan Refuses to Settle Insider-Trading Suit, SEC Says

John Kinnucan, the expert-networker sentenced to four years and three months in prison for his role in passing inside tips to hedge-fund clients, refuses to settle an insider-trading lawsuit, the U.S. Securities and Exchange Commission said.

Kinnucan, 55, who is acting as his own lawyer and incarcerated at the Metropolitan Detention Center, the federal jail in Brooklyn, New York, had previously told the SEC he intended to resolve his case, Mathew Watkins, an SEC lawyer, said in a letter yesterday to U.S. District Judge Alison Nathan.

As the founder of Broadband Research LLC, an expert-networking firm, Kinnucan pleaded guilty to one count of conspiracy and two counts of securities fraud for obtaining and passing illegal tips to hedge fund clients, including two in New York. U.S. District Judge Deborah Batts in Manhattan sentenced him in January.

“I spoke with him again today and he informed me that he now does not intend to attempt to settle this matter,” Watkins said.

Nathan, who is presiding over the SEC case, directed that the SEC file a motion for a ruling before trial by March 22. Kinnucan was directed to respond no later than April 19.

Kinnucan admitted getting inside information about SanDisk Corp., F5 Networks Inc. and OmniVision Technologies Inc., including quarterly revenue numbers, after befriending employees of technology companies between 2008 to 2010.

Paid Sources

He paid his sources in a variety of ways, prosecutors said, including by buying them meals at high-end restaurants and was sentenced to prison as part of a federal crackdown of insider trading at hedge funds, technology companies and expert networking firm consultants.

Kinnucan announced in October 2010 that he had refused a request by FBI agents to wear a wire and inform on his clients, a move that presaged more than dozen insider-trading arrests in an initiative by Bharara’s office and the Federal Bureau of Investigation in New York known as “Perfect Hedge.”

He has been in federal custody since his arrest in February 2012.

Prosecutors said that during the time between the approach by FBI agents and his arrest, he engaged in a “campaign” of threats and anti-Semitic rants against prosecutors, cooperating witnesses and others involved in the case.

The civil case is SEC v. Kinnucan, 12-cv-01230, Southern District of New York (Manhattan); the criminal case is U.S. v. Kinnucan, 12-cv-00163, U.S District Court, Southern District of New York (Manhattan).

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