U.S. Seeks Sentencing Leniency for Ex-Analyst Karl Motey

Karl Motey, a former technology stock analyst who testified for the government in the insider trading trials of Doug Whitman and James Fleishman, deserves leniency when he’s sentenced next week, the government said.

Motey, 48, “played a pivotal role” in the government’s investigation of the expert networking firm Primary Global Research LLC, posing as a hedge fund manager seeking illegal tips from company insiders, prosecutors in the office of U.S. Attorney Preet Bharara in Manhattan said in a letter to the sentencing judge yesterday.

Motey secretly recorded more than 400 phone calls and in-person conversations with more than 50 people in the government’s insider trading probe, they said. Motey’s cooperation was key to the government winning court authorization to wiretap Primary Global’s conference line, according to the letter.

“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 U.S. District Judge Jed Rakoff.

Securities Fraud

Motey pleaded guilty in December 2010 to conspiracy and securities fraud. He is scheduled to be sentenced Feb. 4. He faces a maximum of 20 years in prison on the securities fraud charge and five for conspiracy. In court papers, Motey asked Rakoff to sentence him to one year of probation.

Motey 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.

Motey was approached by agents of the Federal Bureau of Investigation 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.

‘Evade Detection’

“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 fulltime 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.

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.

In a letter to Rakoff made public Jan. 25, prosecutors said they are seeking leniency for Roomy Khan, who also testified against Whitman and separately incriminated Galleon Group LLC cofounder Raj Rajaratnam. Rakoff is scheduled to sentence Khan Jan. 31.

The case is U.S. v. Motey, 10-cr-1249, U.S. District Court, Southern District of New York (Manhattan).

Before it's here, it's on the Bloomberg Terminal.