Tai Nguyen, an expert-networking consultant who pleaded guilty to leaking inside information to ex-SAC Capital Advisors LP fund manager Noah Freeman and others, deserves as long as 57 months in prison, prosecutors said.
Nguyen, president of Insight Research LLC, should serve 46 to 57 months, U.S. prosecutors said in a filing in Manhattan federal court, citing the length of time he engaged in the trading scheme from 2006 to mid-2009.
Nguyen pleaded guilty in June to a count of conspiracy to commit securities fraud and wire fraud by passing material nonpublic information about Abaxis Inc., which his lawyer said he obtained from his sister, then an employee of the Union City, California-based medical products company. Nguyen admitted passing the illegal tips to Freeman, Barai Capital Management LP founder Samir Barai and others.
“He conspired with talented portfolio managers who were privileged to have graduated from this country’s best schools,” Assistant U.S. Attorney David Miller said today in court papers. “Together, they attempted to cheat the system and gain an unfair advantage over the average investor.”
His lawyer, David Wikstrom, argues that Nguyen deserves far less time in prison, saying he is “deeply chastened and remorseful” and has been punished by having “damaged his relationship with his sister and other siblings” as a result of his crimes.
“He has been punished in a unique fashion by having done terrible damage to his relationships with his siblings,” Wikstrom said.
Nguyen’s lawyer cited the 2 1/2-year prison terms given to two others convicted of insider trading in the same courthouse, Donald Longueuil, a former portfolio manager at SAC Capital, and James Fleishman, a former executive of Primary Global Research LLC, a Mountain View, California-based expert-networking firm.
Nguyen is to be sentenced March 14 by U.S. District Judge Naomi Reice Buchwald.
Wikstrom said his client was born in Saigon and emigrated to the U.S. from Vietnam in 1975 with 11 family members. Nguyen has a bachelor’s degree from Purdue University, he said.
Barai met Nguyen in 2005 and hired Insight to provide an analysis of technology company stocks for a monthly fee of $8,000, Wikstrom said. Barai also used Nguyen to launder his money, which he did by having his firm bill Barai Capital a monthly management fee of $20,000 and then having Nguyen pay him the extra $12,000 in cash.
Wikstrom said Nguyen had been recently fired and, eager to impress Freeman and Barai, had forced his sister to pass him illegal tips in December 2005, which he did on six occasions. Both former fund managers are cooperating with the U.S. and haven’t been sentenced.
“Mr. Nguyen’s greedy and stupid decision to exploit his sister’s position to his own advantage, and to garner credibility in the eyes of Barai and Freeman, is a personal and family catastrophe,” Wikstrom said.
The U.S. argued that a stiff prison term would deter others who consider engaging in insider trading, noting that it was due to Nguyen’s actions that the fund managers were able to reap millions of dollars in the scheme.
“Should Nguyen receive a light sentence, financial professionals may be emboldened to engage in similar crimes, knowing that such schemes are difficult to detect and that even if they are caught, they will not face much time in jail,” Miller, the prosecutor, said.
In a separate insider-trading case in the Manhattan federal courthouse, Wesly Wang, a former analyst for SAC’s Sigma Capital unit, was ordered today to pay a $500,000 judgment of money he earned as a result of the scheme. Wang pleaded guilty to two counts of conspiracy to commit securities fraud for passing inside information to a former Sigma Capital portfolio manager, Dipak Patel, and others.
U.S. District Judge Jed Rakoff, who presided over Wang’s case, in January sentenced him to two years’ probation, citing his cooperation with the government.
Wang, who worked as a semiconductor analyst, recorded phone calls and wore a body wire, incriminating about 20 people in insider trading, some of whom haven’t yet been charged, prosecutors said. He faced as long as 37 months in prison.
Rakoff made it a condition of Wang’s sentence that he continue to assist investigators. Wang testified against Whitman Capital LLC hedge fund founder Doug Whitman last year.
Wang is one of eight current or former SAC employees linked by government prosecutors and regulators to insider trading while at the firm. They include Mathew Martoma, a former SAC portfolio manager who is charged with using inside information about the clinical trial of an Alzheimer’s drug to help SAC make $276 million in profits and averted losses. Prosecutors have called it the largest insider-trading scheme in history.
Martoma is charged with passing inside information on the drug trial to Steven Cohen, SAC’s founder, who allegedly used it to liquidate a $700 million position in the companies promoting the drug. Cohen hasn’t been charged.
The case is U.S. v. Nguyen, 12-cr-00495, U.S. District Court, Southern District of New York (Manhattan).