s*********8 发帖数: 901 | 1 NEW YORK – An insider trading case last year that federal authorities said
was the biggest ever is providing a recipe for another case that may be even
bigger.
The current case is largely an extension of work that led to the arrest of
Galleon Group founder Raj Rajaratnam in October 2009. The Galleon
investigation marked the first time that federal authorities used wiretaps
in an insider trading probe.
Similarly, wiretaps led to the first arrest in the latest case. Don Ching
Trang Chu, a consulting firm executive, was arrested Wednesday for allegedly
providing private information about a company's corporate earnings to a
hedge fund.
The FBI this week searched the offices of three hedge funds and subpoenaed
some of Wall Street's most influential firms, including Janus Capital Group
and SAC Capital.
The Galleon case has resulted in 23 arrests and 14 guilty pleas. Many of
those arrested are cooperating in the latest investigation.
The cases represent an offensive by U.S. Attorney Preet Bharara against
white collar crime in the securities industry. One aim of the current case:
unearthing those who helped match employees at public companies with large-
scale traders hoping to profit from information that wasn't available to the
public.
Authorities have said little about the current investigation. But a study of
Bharara's comments over the past year show how it has progressed.
Bharara said when he announced the arrests in the Galleon case last year
that the use of wiretaps marked a turning point in investigations of insider
trading. Wall Street insiders, he said, will be forced to wonder if every
conversation is recorded.
"When sophisticated business people begin to adopt the methods of common
criminals, we have no choice but to treat them as such," he said.
A month later, as he announced more arrests, he said "the alarm bells have
only grown louder."
"How pervasive is insider trading?" he asked. "Is this just the tip of the
iceberg? We don't have an answer yet. But we aim to find out."
Two weeks later, in November 2009, he said white-collar fraud had caused a "
lack of faith in the economic system; a lack of belief in the markets; and a
lack of trust that the playing field is level."
By last month, Preet was holding nothing back, saying that insider trading
is "rampant and may even be on the rise."
Now, at least two defendants in the initial probe seem headed for trial.
Rajaratnam, a former billionaire and the richest Sri Lankan-born person in
the world, and Danielle Chiesi, a former consultant at New Castle Funds,
have pleaded not guilty to charges of securities fraud.
Rajaratnam is a Wall Street analyst who built Galleon into a high-flying
hedge fund that specialized in trading stock of technology companies such as
IBM Corp., Advanced Micro Devices Inc. and Google Inc. Authorities say he
built a web of contacts throughout the technology industry who provided him
with inside information that allowed Galleon to earn millions of dollars in
profits.
Rajaratnam has said through his lawyers that his trades were all based on
public information. Both face potential penalties of more than 100 years in
prison.
Prosecutors have given nearly all the defendants an opportunity to cooperate
so that the government can uncover new instances of insider trading. Harlan
Protess, a lawyer who represented one of the Galleon defendants, said the
number of defendants who pleaded guilty and cooperated was not surprising
and there is ample incentive for them to do so.
"The benefit that a defendant stands to gain from cooperating with federal
prosecutors is directly linked to the quality and quantity of information he
can provide," said Protess, who teaches a class on federal sentencing at
Cardozo Law School. "Thus, once a defendant decides to flip, the more
wrongful conduct in which he was involved, the better off he ultimately will
be when it comes time for sentencing."
His client, Ali Hariri, was a former vice president of Atheros
Communications, a chipmaker based in California. He was sentenced earlier
this month to 18 months in prison after pleading guilty to securities fraud
and conspiracy to commit securities fraud. He is not cooperating in the
other investigation.
The crackdown on insider trading has been a boost for the pocketbooks of
white-collar defense attorneys, said Eric Snyder, a former federal
prosecutor. He was at a traditional gathering of about 1,000 white-collar
crime defense lawyers the day before Thanksgiving at a midtown Manhattan
hotel.
"Everybody was talking about how they're going to get a piece of it," he
said of the arrests expected to result from the latest probe. "Every firm in
the city is expecting they're going to become involved in that case."
The first arrest turned out to be Chu of Somerset, N.J. It apparently was
rushed after investigators who interviewed him on Sunday learned that he was
supposed to fly to Taiwan days later, a trip that he makes frequently.
His lawyer, James DeVita, said only: "We will have an opportunity to present
a defense, and we'll pursue that."
According to court records, the case against him was built when a cooperator
from the Galleon probe engaged him in conversations in which he talked
about inside information and how to prevent federal authorities from
learning about it electronically.
The wiretaps on a hedge fund phone were cited in a criminal complaint filed
in U.S. District Court in Manhattan, where a judge on Wednesday upheld the
government's right to use wiretaps. The judge rejected defense contentions
that they were unconstitutional because they were not specifically
authorized under rules written by Congress regarding wiretaps.
Marc Mukasey, a former federal prosecutor who now represents white-collar
defendants, said prosecutors will still need to be selective about when to
seek court authorization for wiretaps.
"I would not necessarily assume that further investigations mean that it's
wiretaps gone wild," he said. |
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