By Grant McCool
NEW YORK (Reuters) - A research consultant charged last week with illegally tipping hedge funds to inside company information can be released on bail, a judge said, rejecting calls by U.S. prosecutors to keep him detained because of insults he made to government officials who were investigating the case.
The consultant, John Kinnucan, will remain in jail in his hometown of Portland, Oregon, until he can meet the conditions of a $5 million bond, U.S. District Judge Deborah Batts ruled at a hearing in New York on Thursday.
Kinnucan, 54, who has been a vocal critic of the government's sweeping insider-trading probe of hedge funds over the last few years, was arrested last Thursday.
A judge in Oregon granted him bail on Wednesday, but prosecutors hours later won a suspension of the order.
In court on Thursday, prosecutors in New York played audio recordings of expletive-laced voicemail messages that Kinnucan left over a two-month period on the phones of prosecutors, an FBI agent and a cooperating witness in the case.
"He conducted a campaign of obstruction, harassment and intimidation," prosecutor Christopher LaVigne told the judge in arguing for Kinnucan's detention. "The risk is too great that he will continue to engage in obstruction, and worse, go beyond that."
Six audio clips played in court included a Kinnucan voicemail left for a prosecutor, saying "too bad Hitler's not around. He'd know what to do with scum like you."
In an indictment unsealed on Tuesday, Kinnucan was criminally charged with insider-trading conspiracy and securities fraud as head of Broadband Research LLC. If convicted, he could face up to 20 years in prison. He was not charged with threatening government officials.
Kinnucan and his lawyer attended Thursday's hearing by videoconference from Portland. The lawyer, Thomas Hester, said his client had apologized for his conduct to the judge in Oregon and the voicemails should not have been interpreted as threats.
"The messages he left are indefensible and full of invective," Hester said. "He does maintain his innocence in this case and he looks forward to defending himself."
Judge Batts' order imposed restrictions on Kinnucan's use of computers and telephones. She said the $5 million bond should be secured by $100,000 cash or property with four co-signors. Hester said Kinnucan's house was in foreclosure proceedings and that he, his wife and two children were dependent on financial assistance from relatives.
"The vile, filthy, inflammatory, insulting language that the defendant has used frequently with officers of the government and even worse with potential witnesses against him is mind boggling," Batts said, her head turned toward a TV screen where Kinnucan and his lawyer could hear her.
"However, reading it I cannot say there is a direct threat, although he is certainly intimidating people or attempting to do so."
Batts told Kinnucan to appear in her court in New York on March 5 to make an initial appearance on the charges in the indictment.
The case is USA v Kinnucan in U.S. District Court for the Southern District of New York No. 12-00163 and case No. 12-mj-00035 in U.S. District Court in Oregon (Portland)
(Reporting By Grant McCool; Additional reporting by Basil Katz; Editing by Martha Graybow and Matthew Lewis)