Ex-Primary Global executive pleads guilty

Reuters News
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Posted: Jun 07, 2011 7:13 PM
Ex-Primary Global executive pleads guilty

By Basil Katz and Grant McCool

NEW YORK (Reuters) - A former employee of a so-called expert network firm pleaded guilty on Tuesday to charges of conspiring with others to leak corporate secrets to hedge funds in exchange for money, part of a broad U.S. crackdown on insider trading.

Former Primary Global Research (PGR) executive Don Ching Trang Chu, also known as Don Chu, pleaded guilty to one count each of conspiracy to commit securities fraud and conspiracy to commit wire fraud at a hearing before U.S. District Judge Jed Rakoff in Manhattan.

Chu, 57, had been arrested last November and pleaded not guilty in April.

The Somerset, New Jersey, resident told Rakoff he had hedge funds to receive inside tips on companies including chipmakers Atheros Communications Inc, Broadcom Corp and Canada's Sierra Wireless Inc. Atheros was acquired by Qualcomm Inc last month for $3.1 billion.

"I occasionally was present for in-person meetings in Taiwan between PGR clients and PGR consultants during which some of the PGR consultants disclosed to the PGR clients material, non-public information relating to their employers' business," Chu said at Tuesday's hearing.

"All information that you understood was not yet public?" Rakoff asked.

"Yes, yes, your honor," Chu responded.

Rakoff is presiding over the trial of technology consultant Winifred Jiau in the same investigation.

Chu is one of at least 13 people charged over the solicitation of illegal stock tips from consultants working for expert network firms, which match investment managers with public companies.

Prosecutors say they have found instances of insider trading when consultants leaked details that are considered material, nonpublic information.

Chu faces up to 25 years in prison, but prosecutors recommended a sentence of up to six months in his plea agreement.

Prosecutors said that in late 2008, Chu developed a business relationship with a hedge fund manager, Richard Choo-Beng Lee, whose fund paid Chu's firm.

Lee's hedge fund, Spherix Capital, had its employees call a consultant before the consultant's public company was expected to release quarterly earnings, in part to obtain inside information, the government said.

Lee, who founded Spherix with former Galleon hedge fund employee Ali Far, has been cooperating with the government's investigations since April 2009. Lee and Far both pleaded guilty to criminal charges.

Galleon Group founder Raj Rajaratnam, the central figure in a case described by prosecutors as the biggest probe of insider trading at hedge funds on record, was convicted last month after a high-profile trial on 14 charges of securities fraud and conspiracy.

At the hearing on Tuesday, Chu also said that inside information was shared with PGR clients Samir Barai and Noah Freeman, both of whom have pleaded guilty in the government's insider trading probe. Freeman testified for the government on Friday, Monday and Tuesday in Jiau's trial.

The case is USA v Don Ching Trang Chu et al, U.S. District Court for the Southern District of New York, No. 11-00032.

(Reporting by Grant McCool and Basil Katz; Editing by Tim Dobbyn and Lisa Shumaker)