Level Global Investors LP co-founder Anthony Chiasson asked a judge to bar the U.S. from letting a jury hear recorded calls of him receiving alleged illegal tips about Dell Inc. (DELL:US) from John Kinnucan, founder of an expert- networking firm.
Chiasson and former Diamondback Capital Management LLC portfolio manager Todd Newman are scheduled for trial Oct. 29, facing charges they were part a “criminal club” of friends and co-workers who reaped almost $62 million from insider trading in Dell and Nvidia Corp. (NVDA:US) Both have pleaded not guilty.
Chiasson’s lawyers, Greg Morvillo and Reid Weingarten, argue that prosecutors shouldn’t be allowed to include in their case any wiretapped phone calls between Kinnucan and their client, saying Kinnucan hasn’t been identified by prosecutors as a co-conspirator in the case and the calls occurred five months after the alleged conspiracy ended.
“The court should exclude these recorded conversations from evidence because they lack relevance to the conspiracy described and charged in the indictment,” Morvillo and Weingarten said in a memo to the federal court in Manhattan.
Kinnucan, the founder of Broadband Research LLC who once publicly refused to cooperate with the Federal Bureau of Investigation in its insider-trading probe, pleaded guilty in July to passing material, nonpublic information to hedge-fund clients. He isn’t cooperating with the government.
“The government has failed to provide any reason for identifying these recordings among the exhibits it intends to use at trial,” Morvillo and Weingarten said in court papers.
Prosecutors said the alleged conspiracy ran from 2007 to 2009.
Jon Horvath, a former technology analyst at a unit of Steven Cohen’s $14 billion hedge fund SAC Capital Advisors LP, who was charged with the two men, pleaded guilty on Sept. 28 to passing nonpublic information to his portfolio manager. He is cooperating with the U.S.
Prosecutors filed a memo under seal on Sept. 21 describing uncharged crimes against the two defendants. Defense lawyers referred to the government’s memo in their court papers filed October 3.
Eight people have been charged when the case and six have pleaded guilty to insider-trading charges and are cooperating with the U.S. When Manhattan U.S. Attorney Preet Bharara announced the case in January, he said the inside information was allegedly passed from employees who worked at technology companies to fund managers who traded on the nonpublic information.
Chiasson is accused of obtaining material, nonpublic information from Spyridon “Sam” Adondakis, a Level Global analyst.
Chiasson’s lawyers said in a filing that the U.S. has been investigating the case since October 2010 and that Adondakis, “was approached by the government on Oct. 14, 2010.” He has been cooperating with the U.S. since Nov. 2, 2010, defense lawyers said. Previously, the timing of the government’s investigation hadn’t been publicly disclosed.
In separate filings, lawyers for both men asked U.S. District Judge Richard Sullivan, who is presiding over the case, to exclude evidence about their client’s compensation.
Chiasson made $9.79 million at Level Global in 2009, not including deferred compensation or profit sharing, his lawyers said. Newman’s earnings weren’t included in court papers filed by his lawyer, John Nathanson.
Attorneys for both men also argue that they should be allowed to cross-examine cooperating witnesses about the potential benefits of their cooperation and the potential penalties the cooperators could have faced.
Weingarten, Morvillo and Nathanson said that prosecutors have asked in their sealed memo that defense lawyers be prohibited from “raising in any way, the government’s investigative and prosecutorial methods, including the use of wiretaps and cooperating witnesses.”
The lawyers said their clients’ defenses would be hampered if the judge grants the government’s request.
“This effort to prevent the defense from challenging in any way the conduct of the investigation and prosecution is overbroad, contrary to case law, and in any event premature,” the defense lawyers said in a joint memo to Sullivan.
Prosecutors said in August that they had additional evidence the defendants attempted or did obtain material nonpublic information about 11 more stocks not listed in the indictment, including Advanced Micro Devices Inc. (AMD:US), Taiwan Semiconductor Manufacturing Co. (TSM:US), Texas Instruments Inc. (TXN:US), Intel Corp. (INTC:US) and Western Digital Corp. (WDC:US)
The case is U.S. v. Newman, 12-00124, U.S. District Court, Southern District of New York (Manhattan).
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