Visium Trader’s Guilty Conscience Led Him to Federal AuthoritiesBy
Jason Thorell recalls growing unease with mismarking scheme
Star witness concludes testimony in trial of firm executive
The weight on bond trader Jason Thorell’s conscience kept getting heavier.
It started in mid-2011 when Thorell’s supervisor at Visium Asset Management LP called him into a private meeting. He asked Thorell to begin using his own Visium e-mail account to submit monthly asset valuations that the boss had prepared -- and to keep it a secret.
Later, over drinks at the former Stone Rose Lounge near New York’s Columbus Circle, a broker told Thorell he had received a thumb drive in the mail from another Visium executive, Stefan Lumiere. The drive contained figures Lumiere wanted the broker to dictate back to Visium to price the fund’s holdings.
“Things seemed to be escalating to another level of egregiousness,” Thorell testified in Lumiere’s securities-fraud trial. Lumiere has pleaded not guilty to charges he participated in a plot to inflate the value of distressed-debt holdings in the firm’s bond portfolio -- by providing phony asset valuations -- to make it look better to investors.
The government’s star witness, Thorell concluded two days of testimony in Manhattan federal court Friday, explaining to jurors his anguish at coming to the realization that he was involved in an illegal scheme. He also described his frustration at trying to persuade his superiors to take his concerns seriously.
Thorell said he eventually reached a breaking point, setting off a chain of events that included secret recordings of Visium executives, charges against three of them -- one of whom killed himself days after being charged -- and the collapse of the hedge fund firm that managed $8 billion at its peak.
As star witnesses go, Thorell, 38, is unusual for a white-collar crime case. In the crackdown on insider trading and the rigging of financial benchmarks, prosecutors generally built their cases with the help of cooperators who joined in a criminal plan and then sought leniency after being caught. Thorell, who is not being prosecuted, said he came forward because it was the right thing to do.
Still, Thorell isn’t entirely a disinterested witness. As he acknowledged under questioning from Lumiere’s lawyer, he is participating in a U.S. Securities and Exchange Commission whistle-blower program and could get hundreds of thousands of dollars if the agency’s civil suit against Visium leads to a recovery of more than $1 million. Thorell said he isn’t being paid for his testimony by the Federal Bureau of Investigation or the U.S. Justice Department and will not receive payment as a result of the criminal trial.
Lumiere’s trial resumes on Tuesday.
Tall, plain-spoken and dressed in a navy suit, Thorell testified that after drinks at the Stone Rose, he sought advice from his brother, sister and brother-in-law at a family gathering in the Boston area. He hired a lawyer soon after. On June 24, 2013, he sent an e-mail to Visium founder Jacob Gottlieb asking to meet.
“Jake, I would like to discuss a serious concern I have about the monthly pricing process at your convenience. Please let me know when you have time to meet,” he said in an e-mail, which was shown to jurors.
‘Stressed and Concerned’
Gottlieb called a few minutes later and asked Thorell to come to his office. As he gave his account, Thorell said Gottlieb appeared “stressed and concerned,” especially when Thorell said he’d hired a lawyer. At the end of the meeting, Gottlieb said he would have the firm’s compliance office contact Thorell. But Thorell said he never heard from anyone.
Thorell also told jurors that he secretly recorded his conversation with Gottlieb -- even before he agreed to wear a wire for the FBI. He said he did so because he was worried about the seriousness of the situation, and wanted to have proof that he tried to come clean.
Within days, Thorell received a month-end set of price quotes from his boss, Christopher Plaford, that he was supposed to submit. Thorell said he called Gottlieb on his mobile phone seeking guidance and was told to call compliance. Thorell said he talked to Steven Ku, the chief operating officer, and David Keily, the general counsel who oversaw compliance, and their solution was to remove him from the valuation process.
“But at the end of the month, nothing had been done,” Thorell said. “I expected they would take it seriously, but they were dismissive.” Ignored by Visium executives, Thorell said he decided to approach the SEC and FBI.
Gottlieb, Ku and Keily haven’t been accused of wrongdoing. A spokesman for Gottlieb declined to comment. Ku and Keily didn’t respond to e-mails seeking comment. Plaford has pleaded guilty and is cooperating with prosecutors.
In July 2013, Thorell said he received yet another sheet of pricing data from Plaford to submit with instructions to “wait till end of day,” according to court testimony. He told jurors he thought that was odd since the market wasn’t closed yet and prices would still be moving around.
By that time, Thorell said his relationships at the firm were growing more strained. In an Aug. 1, 2013 meeting, Thorell said Ku was evasive. “He behaved overall in what to me was obviously a very distrustful manner, very elusive.”
Thorell was fired from Visium in November 2013 after the firm shut down its credit fund and its assets were liquidated amid a stretch of declining performance that led to investor redemptions. He subsequently made three recordings of Lumiere, including at his apartment on Central Park South at the direction of the FBI.
In that conversation, Thorell acknowledged the pressure he was feeling while discussing the pricing scheme with Lumiere. “Alright man, I got to get to the gym,” Thorell told Lumiere. “This is stressful.”