Karl Motey, a former computer-chip industry analyst, testified that he got confidential revenue figures for Marvell Technology Group Ltd. (MRVL:US) from company insiders and gave the data to Whitman Capital LLC founder Doug Whitman.
Motey told jurors today at Whitman’s insider-trading trial that he took tips from two employees at Marvell from 2007 until April 1, 2009, when he was approached by Federal Bureau of Investigation agents. He passed the information to his hedge- fund clients including Whitman, he said. His alleged Marvell sources, Bill Brennan and Sam Miri, haven’t been charged.
“I would tell him that the information came from a particular contact at Marvell,” Motey said during the second day of Whitman’s trial in Manhattan federal court. “He would thank me and tell me the information was useful to him.”
Prosecutors have charged Whitman with using inside information from Motey and from Roomy Khan, a former Intel Corp. (INTC:US) executive, to make almost $1 million for his Menlo Park, California-based hedge fund.
The trial is part of a broad government investigation of insider trading involving hedge funds. Since August 2009, at least 70 people have been charged with illegal trading by the office of U.S. Attorney Preet Bharara. More than 60 have pleaded guilty or been convicted at trial.
Motey, who pleaded guilty to conspiracy and securities fraud, told jurors he’s testifying in hopes of avoiding a prison sentence.
Prosecutors said they plan to call Khan as a witness. Jurors will also hear from Wesley Wang, a consultant and a friend of Whitman’s, who admitted passing tips about Cisco Systems Inc. (CSCO:US), Polycom Inc. (PLCM:US) and Marvell, Assistant U.S. Attorney Christopher LaVigne said yesterday.
Whitman denies the charges against him.
In an opening statement yesterday, one of his attorneys, David Anderson, told jurors that Motey, Khan and Wang are “criminals and liars” who hope to stay out of prison by incriminating his client.
Motey told jurors today that he and Whitman met during the 1990s. They later shared an interest in Marvell as both thought the chipmaker’s stock was undervalued, he said. Motey told jurors he began working as a consultant for Whitman and four other clients in 2006, after losing a job at Wachovia Corp.
Motey testified that Whitman paid him $12,500 a quarter in “soft dollars.” Soft dollars are generated as trading commissions and directed to a third party, he said.
Motey read to jurors from notebooks he kept with entries in English and Farsi regarding information about Marvell that he said came from Miri and Brennan. They gave him material he knew to be confidential, including revenue figures before they were reported publicly and the company estimates of how Marvell expected to do financially in future quarters.
Marvell, based in Hamilton, Bermuda, makes computer chips that run smartphones and that are used in computer hard drives.
Douglas Yoo, a spokesman for the company, didn’t immediately return a message seeking comment on Motey’s testimony.
The case is U.S. v. Whitman, 12-cr-00125, U.S. District Court, Southern District of New York (Manhattan).
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