Consultant fed 'spot-on' tips to fund managers

Date: Friday, June 3, 2011
Author: Jonathan Stempel, Reuters

Opening arguments in trial of Primary Global's Jiau

First expert network consultant to go to trial

Eight guilty pleas in expert networking part of probe (Adds first witness' testimony, trial details)

NEW YORK, June 2 (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, faces charges of securities fraud and conspiracy to commit securities and wire fraud. She has been jailed since her arrest in late December. She was denied bail after a judge said she was a flight risk.

In his opening argument, Assistant U.S. Attorney David Leibowitz said Jiau often spoke in code to conceal her crimes, calling her inside sources "cooks" and the payments she received "sugar." Jiau received more than $200,000 in payments for her illegal tips, Leibowitz said.

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's guilt.

"You'll hear the crime being committed in the defendant's own words, her own voice, in real time," Leibowitz told the jury of nine men and three women in Manhattan federal court.

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

The insider trading probe is largely centered on hedge funds and close to 50 people have been charged.

Its most prominent defendant is Galleon Group hedge fund founder Raj Rajaratnam, who was found guilty by another Manhattan federal jury three weeks ago on 14 securities fraud and conspiracy charges. He could face as much as 19-1/2 years in prison under federal sentencing guidelines.

EX-SAC PORTFOLIO MANAGER TO TESTIFY

Dressed in a black suit and with her hair pulled back in a ponytail, Jiau, 43, sat mostly still as her trial began. The jury was chosen on Wednesday.

Prosecutors said Jiau passed inside tips about upcoming results of chipmakers Marvell Technology Group Ltd (MRVL.O: Quote) and Nvidia Corp (NVDA.O: Quote) 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.

Joanna Hendon, a lawyer for Jiau, said her client knew some of the information she was sharing was nonpublic, but that none was important enough for a reasonable investor to trade on.

"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.

Freeman, a former portfolio manager at hedge fund SAC Capital Advisors, is expected to testify for the government on Friday, Hendon said after the jury was dismissed for the day.

He pleaded guilty in the case. SAC said it fired him in 2010.

SO-SO PIANIST

The government began its case with testimony from FBI agent Michael Brown, who said he reviewed emails and instant message conversations between Jiau and others.

In one, a June 3, 2008 instant message conversation with Barai, which was displayed to the jury, Jiau wrote the "cooks are on strike" and suggested Barai could "drop some of your extra sugar to me."

After Barai said he was taking care of it, Jiau later said: "I will know something when I got the sugar. Before that, I don't know anything," according to the conversation.

Thirteen people have been charged in the portion of the insider trading probe related to expert networking firms and eight have pleaded guilty.

Jiau is the first to go to trial and the Fremont, California, resident 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 who have pleaded guilty and will testify for the government as part of cooperation agreements are Jason Pflaum, a former analyst for Barai's firm Barai Capital Management; and Sonny Nguyen, a former Nvidia analyst who said he gave Jiau advance notice about Nvidia's results.

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