Bloomberg News

Clay Capital’s James Turner Pleads Guilty in Insider Case

December 20, 2011

(Updates with prosecutor’s statement in fourth paragraph.)

Dec. 19 (Bloomberg) -- James F. Turner II, the chief investment officer of hedge fund Clay Capital Management LLC, pleaded guilty to his role in an insider-trading scheme that prosecutors said made more than $2.5 million in illicit profit.

Turner, 44, illegally traded in shares of Autodesk Inc., Moldflow Corp. and Salesforce.com Inc., he admitted in federal court in Newark, New Jersey. Clay Capital operated the Clay Fund from January 2007 to December 2010, according to a U.S. Securities and Exchange Commission complaint filed Aug. 31.

Turner, of Traverse City, Michigan, admitted today he got tips from Scott Vollmar, his brother-in-law and a director of business development at Autodesk, and from Scott Robarge, a college friend and manager at Salesforce.com.

“Today’s guilty plea closes the door on an insider trading scam in which three people used their access to privileged information to manipulate trades and ensure their own success at the expense of other stockholders,” U.S. Attorney Paul Fishman said in a statement.

Turner pleaded guilty to one count of securities fraud. He faces as many as 20 years in prison when U.S. District Judge Dennis Cavanaugh sentences him on April 16. Joseph Bush, Turner’s attorney, declined to comment after the plea hearing.

Vollmar, of Florence, Oregon, and Robarge, of Louisville, Colorado, previously pleaded guilty to conspiracy to commit securities fraud. Turner, Vollmar and Robarge were sued by the SEC over the scheme.

‘Investment Prowess’

Turner and three partners founded Clay Capital as a hedge fund in June 2006 to use the “investment prowess” of Turner, according to the SEC. He had worked as a securities analyst and portfolio manager for two financial services companies and a hedge fund, the SEC said.

While the investments of Turner and his partners remain in the Clay Fund, its other assets were liquidated and distributed in December 2010, the SEC said.

Turner admitted that from January 2008 to May 2008, Vollmar gave him confidential information about Autodesk’s interest in acquiring Moldflow. Turner bought $2.3 million in shares of Moldflow for Clay Capital and $3.5 million for himself and family members, he admitted.

After Autodesk, a software company in San Rafael, California, announced on May 1, 2008, that it was buying Moldflow, Turner sold all of the shares. He made $650,000 in illegal profits for Clay Capital and $1.1 million for his family.

Turner separately generated $590,000 in illicit profits by betting that Autodesk shares would fall after its earnings announcement and lowered guidance on Feb. 26, 2008, he admitted. Vollmar had previously tipped him that the company would have trouble meeting its earnings targets.

Turner also reaped $224,000 in illicit profits after Robarge tipped him that Salesforce.com, a software company in San Francisco, would exceed the earnings estimates of analysts for the quarter ended Jan. 31, 2008, according to court documents.

The case is U.S. v. Turner, U.S. District Court, District of New Jersey (Newark).

--Editors: Andrew Dunn, Fred Strasser

To contact the reporter on this story: David Voreacos in Newark, New Jersey, at dvoreacos@bloomberg.net.

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


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