June 2 (Bloomberg) -- Prosecutors and lawyers for Winifred Jiau, an ex-Primary Global Research LLC consultant accused of passing nonpublic information to hedge fund managers, will present their opening arguments to jurors today, a judge said.
Jiau is charged in a five-count indictment that includes conspiracy, securities fraud and wire fraud, for allegedly passing inside tips about Nvidia Corp. and Marvell Technology Group Ltd. She is the first expert networker to go on trial for insider-trading charges and, if convicted, may face as long as 25 years in prison.
U.S. District Judge Jed Rakoff in Manhattan said the jury, which was selected yesterday, will begin hearing opening statements today. After the jury was dismissed yesterday, Jiau’s lawyer, Joanna Hendon, told Rakoff that she would concede to the jury that her client worked as an expert networker and provided information to hedge fund managers.
Hendon said she would also argue the information that the U.S. said her client passed wasn’t “material,” or information that a reasonable investor would consider important to trade upon or have a bearing upon a company’s stock.
“Sure she got the information, sure she is paid thousands of dollars, it was nonpublic, sometimes, not always,” Hendon told Rakoff. “She was happy to get it to her sources, she is happy to make hedge funds happy, but at the end of the day, the information she had was not material to any trades.”
Jiau is one of 13 people charged since November in the expert-networking probe by federal prosecutors in the office of U.S. Attorney Preet Bharara in Manhattan. That investigation is part of a larger probe of illegal stock-tipping. Eight have pleaded guilty to federal charges.
Her case is one of several overlapping insider-trading rings stemming from the probe of New York-based hedge fund Galleon Group LLC. Its co-founder, Raj Rajaratnam, was convicted of directing the largest hedge fund insider-trading ring and faces almost 20 years in prison at his July 29 sentencing. His former deputy, Zvi Goffer, is on trial in Manhattan federal court on related charges.
Assistant U.S. attorneys Avi Weitzman and David Leibowitz, who are prosecuting Jiau’s case, have previously argued that she passed inside information obtained from sources at Nvidia and Marvell to Noah Freeman, a Boston hedge-fund manager who pleaded guilty and is cooperating with the U.S., and to Samir Barai, founder of Barai Capital Management LP in New York.
Freeman and Donald Longueuil, another former hedge fund manager who pleaded guilty to insider-trading charges brought by Bharara’s office, worked as portfolio managers at SAC Capital Advisors LLC, the hedge-fund firm run by Steven Cohen.
Last month, Barai and Sonny Nguyen, a former analyst with Nvidia, both pleaded guilty to insider trading charges in federal court in New York and implicated Jiau in their schemes.
Prosecutors said that Nguyen will testify for the government at Jiau’s case and indicated that Freeman could also be a witness for them.
When he pleaded guilty, Barai said he participated in calls with Jiau in 2008 in which she provided tips to him about Marvell, a Santa Clara, California-based maker of chips for personal computers and mobile phones.
Barai is also cooperating with the U.S., prosecutors said. If he provides “substantial assistance,” to their case, prosecutors said they will submit a letter to his sentencing judge seeking a reduced sentence because of his cooperation.
Nguyen said in court last month that he passed tips to Jiau about Santa Clara, California-based Nvidia’s quarterly earnings before they were publicly announced. Nvidia is a maker of graphics chips. He said he conspired with Jiau and a Marvell employee he identified as Stanley Ng to pass and receive tips from 2007 to 2008.
Rakoff yesterday rejected a bid by Hendon to obtain copies of secret recordings she said were made by Freeman of other hedge fund colleagues and associates in an attempt to aid the investigation. Weitzman argued they weren’t admissible because they didn’t involve a conspiracy with Jiau and shouldn’t be turned over. Judge Rakoff agreed.
Freeman’s lawyer, Benjamin Rosenberg, didn’t immediately return a voice-mail message left at his office after business hours seeking comment about the alleged recordings.
Hendon also argued yesterday that so many others passed insider tips that whatever her client is accused of passing was insignificant.
“There are so many professionals out there that have earnings information that there is an argument out there about whether any fiduciary duty was ever breached,” Hendon told Rakoff.
In November, Bharara’s office accused Don Ching Trang Chu, another former consultant with Primary Global Research, of being a liaison between expert networking consultants and hedge fund clients.
The U.S. alleged that Chu established a relationship with Richard Choo-Beng Lee, a former partner at San Jose, California- based Spherix Capital LLC. Lee was employed as an analyst by SAC Capital Advisors from 1999 to 2004.
Lee, who has been linked to Rajaratnam’s insider-trading ring, has pleaded guilty and is cooperating with the U.S. along with his partner Ali Far.
The case is U.S. v. Jiau, 11-cr-00161, U.S. District Court, Southern District of New York (Manhattan).
--Editors: Michael Hytha, Peter Blumberg
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