A California finance researcher who prosecutors said used code words like "recipes," "cooks" and "sugar" to disguise an insider trading scheme was convicted of wire fraud Monday in federal court.
Winifred Jiau also was convicted of conspiracy to commit securities fraud and wire fraud in one of the first trials to result from a government crackdown of Wall Street middlemen suspected of peddling inside information as if it were legitimate research. The jury got the case Friday after a two-week trial and deliberated less than a day.
Jiau, 43, of Fremont, Calif., was among 13 people arrested last year on charges that she conspired to accept cash and gifts to feed inside information to hedge funds. Most of the other defendants have pleaded guilty.
Jiau, a U.S. citizen born in Taiwan, worked for two years as a consultant for Primary Global Research, a Mountain View, Calif.-based company.
Prosecutors said she earned more than $200,000 by selling "tomorrow's news today" about earnings and performance of publicly traded companies. The information, they say, was communicated in code with her co-defendants, sometimes using "cooks" to refer to tipsters, "recipe" for the inside information and "sugar" for what she was paid for it.
The expansive paper and electronic trail exposed how the hedge fund managers made massive trades moments after getting information from her, prosecutors argued.
Defense attorney Joanna Hendon countered that one of the government's key witnesses, former portfolio manager Noah Freeman, was disdainful toward Jiau and dismissive of her tips. In her closing argument Friday, she also highlighted defense evidence that she argued showed that another hedge manager-turned-cooperator made his trades based on research supplied by high-priced analysts rather than anything provided by Jiau.
Freeman testified that he rewarded Jiau with $5,000 a month, and sent her an iPhone, a dozen lobsters and a $300 gift certificate to a clothing boutique. She later insisted they cancel the gift certificate and make it for a restaurant near her home.
Prosecutors backed up the testimony by unveiling an email in which Freeman instructed his secretary to ship the lobsters to Jiau.
"I know you hate her, but we have to do this," Freeman wrote. The secretary wrote back: "Sure thing, I hope she gets sick from the lobsters."
Freeman has already pleaded guilty to conspiracy and securities fraud charges.
Jiau has remained jailed since her arrest, unable to make $500,000 bail. She faces steep fines and jail time of up to 20 years when she is sentenced Sept. 21. Her lawyer pledged to appeal the verdict.
The investigation into Primary Global Research grew out of what prosecutors have called the largest hedge fund insider trading case in history. The main defendant in that case, one-time billionaire Raj Rajaratnam, is awaiting sentencing after being convicted last month for fraud associated with his Galleon Group of hedge funds.