Consultant fed "spot-on" tips to fund managers: prosecutor

Reuters News
Posted: Jun 02, 2011 5:33 PM
Consultant fed "spot-on" tips to fund managers: prosecutor

By Jonathan Stempel

NEW YORK (Reuters) - A technology consultant violated insider-trading laws by funneling "spot-on," nonpublic information about two chipmakers' results to hedge fund managers, a prosecutor said at the start of her trial.

Winifred Jiau, a former consultant at Primary Global Research LLC, is the first person to go to trial in a portion of a broad-based insider trading probe that focuses on so-called expert networking firms. Such firms use consultants to match industry experts with money managers.

Taiwanese-born Jiau, known as Wini, has been jailed since her late December arrest. She was denied bail after a judge said she was a flight risk.

As in other cases in the insider trading probe, the government is basing part of its case on recorded phone calls that it says show Jiau committing a crime.

"You'll hear the crime being committed in the defendant's own words, her own voice, in real time," Assistant U.S. Attorney David Leibowitz told the jury of nine men and three women in his opening argument in Manhattan federal court on Thursday.

"It was the defendant, on the phone, who provided spot-on information," he added. "You will see how accurate she was."

The government's broad insider trading investigation is largely centered on hedge funds. The most prominent defendant is Galleon Group hedge fund founder Raj Rajaratnam, who was found guilty by a Manhattan federal jury in May on 14 securities fraud and conspiracy charges. He could face more than 15 years in prison under federal sentencing guidelines.

Dressed in a black suit and with her hair pulled back in a ponytail, Jiau, who is in her mid-40s, sat mostly still as her trial began. Her lawyer argues that any information her client passed to others was not "material" or important enough for a reasonable investor to trade on.

Prosecutors said Jiau made more than $200,000 when she passed inside tips about upcoming results of chipmakers Marvell Technology Group Ltd and Nvidia Corp to clients including former hedge fund managers Samir Barai and Noah Freeman.

These clients then traded on the information or passed it to others, prosecutors said.

Freeman, a former portfolio manager at hedge fund SAC Capital Advisers, is among the witnesses expected to testify for the government. He has pleaded guilty in the case. SAC said it fired him in 2010.


Jiau's lawyer, Joanna Hendon, said her client knew some of the information she had been learning was nonpublic, and even talked in code. But, the lawyer said, it didn't matter.

"None of the information she provided to Mr. Barai or Mr. Freeman was material," a necessity for an insider trading charge to stick, Hendon said.

Jiau has pleaded not guilty to five counts including securities fraud, wire fraud and conspiracy.

Thirteen people have been charged in the portion of the government's insider trading probe related to expert networking firms, and eight have pleaded guilty. Jiau is the first to go to trial.

Jiau, who had lived in Fremont, California, is the only defendant in the probe known to have been denied bail.

Hendon, in her opening statement, described her client as "a very good skier" and "so-so pianist" who also owns a golden retriever.

"Send Ms. Jiau back to California and to her dog," the lawyer concluded.

Leibowitz said others expected to testify for the government are Jason Pflaum, a former analyst for Barai's firm Barai Capital Management; and Sonny Nguyen, a former Nvidia analyst who said last week he tipped Jiau about Nvidia results before they became public.

Nguyen and Pflaum have pleaded guilty and agreed to cooperate with prosecutors.

The case is U.S. vs. Jiau, U.S. District Court, Southern District of New York, No. 11-cr-00161.

(Reporting by Jonathan Stempel; Editing by Tim Dobbyn)