Bloomberg News

‘Hedge Fund Paymasters’ Bought Inside Tips From Jiau, U.S. Says

June 17, 2011

June 17 (Bloomberg) --A former Primary Global Research LLC consultant got friends at Nvidia Corp. and Marvell Technology Group Ltd. to give her financial data she sold to her “hedge fund paymasters,” a prosecutor told a jury.

“This was a brazen insider-trading scheme, and at the heart of it was Winifred Jiau,” Assistant U.S. Attorney Avi Weitzman said yesterday in closing arguments at her trial in Manhattan federal court. “Just like her hedge fund clients, she did it for the money,” he said.

Jiau, 43, is charged with illegally passing nonpublic financial information about the two Santa Clara, California- based technology companies to hedge fund managers. She’s the first of the so-called expert networkers to go on trial since the U.S. charged at least a dozen people beginning in November.

Jiau, of Fremont, California, is charged with securities fraud and conspiracy to commit securities fraud. If convicted she faces as long as 25 years in prison.

Weitzman said Jiau befriended Sonny Nguyen, then a senior financial analyst for Nvidia, and Stanley Ng, an accountant with Marvell, to obtain the information she then sold.

Jiau also cheated the friends who passed the information, Weitzman said. She demanded more money from her hedge fund clients to pay Nguyen and Ng then failed to share the payments, he said. The portfolio managers paid Primary Global Research $10,000 a month for exclusive access to Jiau, one of them testified. Jiau earned at least $208,000 for her work, Weitzman said.

Cooperating Witnesses

Nguyen testified for the prosecution as one of three cooperating witnesses. He pleaded guilty to federal charges in May. Ng was placed on administrative leave by Marvell in January after he refused to cooperate with an internal investigation, court records show.

Noah Freeman, a former SAC Capital Advisors LP portfolio manager, testified that he had a secret agreement with Samir Barai, founder of New York-based Barai Capital Management LP, to pay Primary Global for exclusive access to Jiau.

Trading records show that minutes after a May 23, 2008, conversation between Jiau and Barai, the fund reversed its trading in Marvell stock, changing from a short position of 25,000 shares to taking a long position of 118,400 shares in the chipmaker.

Profits, Losses

As a result, Barai Capital made more than $800,000 in profits and avoided losses of more than $60,000, Weitzman said.

A third person who the government said received Jiau’s tips was Donald Longueuil, a former SAC Capital fund manager and Freeman’s former best friend. Freeman, Barai and Longueuil have all pleaded guilty.

“With these well-placed insiders at Nvidia and Marvell, Jiau had spies in important places at public companies,” Weitzman said.

A Financial Industry Regulatory Authority official testified that Jiau passed a securities licensing exam in 2008 at the same time she was engaged in the conspiracy with Barai and Freeman, Weitzman said. He said 50 percent of the exam was securities law and 20 percent pertained to insider trading and ethics.

Prosecution witnesses also corroborated each other on key details, he said. Freeman testified that in 2007 he sent Jiau presents such as iPhones, gift certificates to the Cheesecake Factory and live lobsters. An Nvidia official testified Jiau gave her a gift of live lobsters in November 2007 while Nguyen said Jiau gave him an iPhone, took him and his family to the Cheesecake Factory and gave him live lobsters in late 2007.

‘Re-gifted Lobsters’

“She re-gifted lobsters,” Weitzman said.

Joanna Hendon, Jiau’s lawyer, told the jury that despite the government’s assertion her client was at the center of the insider-trading scheme, Barai and Freeman had many other sources of inside information. There was no evidence they considered her tips serious enough to base trades upon, she said.

She showed jurors the raft of e-mails concerning Marvell financial information which was sent by another person the portfolio managers nicknamed “10-K” because Freeman said his tips were as complicated as a company’s filing. Hendon also presented jurors with Jiau’s trading records that showed she lost tens of thousands of dollars when she traded in Marvell and Nvidia stock.

Hendon also referred to a series of instant electronic messages between Barai and Longueuil in which they mock Jiau, her accent and ambitions. “She is CRAZY,” Barai said in one.

‘Crazy’

“They thought she was crazy,” Hendon said. “Then they come into court two years later, and they tell you she was their most critical source of information and that she’s in the center of their insider-trading scheme.”

U.S. District Judge Jed Rakoff, who is presiding over the case, told jurors yesterday that they will hear a rebuttal summation from a prosecutor today and then he will instruct them on the law. They will then begin their deliberations, he said.

Expert networkers provide industry information to financial company clients. Jiau is the first to go to trial on charges of securities fraud and conspiracy.

The case is U.S. v. Jiau, 1:11-cr-00161, U.S. District Court, Southern District of New York (Manhattan).

--Editors: Charles Carter, Fred Strasser

To contact the reporter on this story: Patricia Hurtado in New York at pathurtado@bloomberg.net.

To contact the editor responsible for this story: Michael Hytha at mhytha@bloomberg.net.


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