It was easy to glean illegal, inside information from the contacts provided by firms that matched industry researchers with stock traders looking for an edge, a former hedge fund manager testified Monday.
"Typically, we'd just ask," Noah Freeman told a jury hearing an insider trading case.
The testimony came in the trial of Winifred Jiau, one of 13 defendants charged publically so far in the government's probe of securities industry workers who pass along inside information camouflaged as legitimate research. The trial of Jiau, who worked for a computer chip manufacturer and as a consultant for a financial research firm, is the first to result from the federal probe that was revealed last fall.
Freeman, who worked from 2005 to March 2008 at Sonar Capital before working two years at SAC Capital Advisors, said he began using so-called expert networking services in 2005. He said he usually settled on contacts arranged by Primary Global Research, because the Mountain View, Calif.-based company did not charge for each call to an expert but rather provided a "season pass, as you were, or all-you-can-eat" for a set price.
On Friday, Freeman testified that he made obtaining inside information a regular part of his business model, earning $20 million to $30 million through inside trades while he was at Sonar.
On Monday, he said he usually tried to be direct in asking contacts at public companies for secrets. Sometimes, though, he said he had to get creative.
"Wow, I hear you guys are growing 12 percent this quarter," he said he might say, eliciting a reaction that would confirm his suspicion: "Yeah, how did you know?"
A prosecutor asked him if anyone ever refused to provide inside information.
"Many, many, many," he said.
Freeman said Jiau became a valued source of inside information after he first had coffee with her in May 2006. He said he began speaking with her once or twice a month and she provided inside information about the number of computer chips being made for other companies by her firm, Taiwan Semiconductor Manufacturing Co.
He said he began referring to her as "Winnie or Pooh or Poohster, a joking reference to Winnie the Pooh."
Freeman testified that Jiau's tips over the years were "extremely" helpful, enabling him to make from $5 million to $10 million in illegal profits from Jiau's accurate earnings information about a single technology company.
The Fremont, Calif., woman has pleaded not guilty. She remains incarcerated, unable to make $500,000 bail.
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