Bloomberg News

Expert-Networking Executive Gets 2 1/2 Years in Fraud Scheme

December 28, 2011

(Updates with Justice Department comment in 13th paragraph.)

Dec. 21 (Bloomberg) -- Former Primary Global Research LLC executive James Fleishman was sentenced to 2 1/2 years in prison for helping pass confidential information to hedge-fund managers as part of an insider-trading scheme.

U.S. District Judge Jed Rakoff sentenced Fleishman, 42, of Santa Clara, California, today in federal court in Manhattan. A jury convicted him in September of two conspiracy charges for what the U.S. said was a scheme to obtain and pass confidential information from technology-company employees who moonlighted as consultants for Mountain View, California-based Primary Global, a so-called expert-networking firm.

“Insider trading has been a subject of prosecutions in the Southern District of New York and elsewhere for at least the last 30 or 40 years and yet the prosecutions have not done enough to deter this serious and sophisticated crime,” Rakoff said before he imposed the sentence.

Since last year, at least 15 people were charged with insider trading by Manhattan U.S. Attorney Preet Bharara’s office in a nationwide crackdown on expert-networking consultants who give hedge-fund managers confidential information. At least twelve defendants pleaded guilty, including Noah Freeman, a former portfolio manager with SAC Capital Advisors LP, and Samir Barai, the founder of Barai Capital Management LP.

Request Denied

Rakoff said Fleishman must report to prison Feb. 7. Defense attorney Ethan A. Balogh asked the judge to recommend Fleishman serve his time at Taft Correctional Institution in Taft, California. Rakoff denied Fleishman’s request to remain free on bail while he appeals his conviction.

Fleishman didn’t speak at his sentencing and Balogh declined to comment after the hearing.

The day after Fleishman was found guilty, Rakoff sentenced Winifred Jiau, a former Primary Global consultant who was also convicted by a jury, to four years in prison for her role in the scheme.

Cooperating witnesses testified at Fleishman’s trial that the nonpublic information was passed to his clients, fund managers who paid Primary Global, also known as PGR, for consultation calls.

‘Active Role’

Fleishman had asked to be sentenced to 12 months’ home detention. Prosecutors asked in court papers for a sentence within the nonmandatory guideline range, which was from seven years and three months to nine years. He faced as long as 25 years.

“He took an active role in recruiting clients,” Assistant U.S. Attorney Antonia M. Apps told Rakoff today.

Flieshman was convicted of conspiracy to commit securities fraud and conspiracy to commit wire fraud.

Earlier this month, Rakoff rejected Fleishman’s bid to have his conviction thrown out or to be granted a new trial on the grounds that prosecutors failed to establish any of the acts taken to further the scheme occurred in New York.

“The sentencing of James Fleishman stands for the proposition that if business as usual means violating the securities laws then business as usual has to stop,” Bharara said in an e-mailed statement.

The case is U.S. v. Nguyen, 11-cr-32, U.S. District Court, Southern District of New York (Manhattan).

--With assistance from Patricia Hurtado in New York. Editors: Mary Romano, Peter Blumberg

To contact the reporter on this story: Thom Weidlich in New York at tweidlich@bloomberg.net.

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


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