Bloomberg News

Bartender, Dog Walker to Judge Level Global Co-Founder at Trial

November 13, 2012

A bartender and a dog walker are among the federal court jurors who are set to hear opening arguments in the insider-trading trial of Level Global Investors LP co-founder Anthony Chiasson and Todd Newman, a former portfolio manager for Diamondback Capital Management LLC.

The jury of seven women and five men also includes a computer animator on feature films, a retired postal worker and a medical assistant. The jurors won’t include a hedge fund manager and the mother-in-law of another who expressed harsh views of the industry and were excused by U.S. District Judge Richard Sullivan in Manhattan.

Chiasson and Newman worked at funds that were raided by the Federal Bureau of Investigation in November 2010, as part of a nationwide crackdown of illicit trading by portfolio managers, analysts and insiders at technology companies. Opening statements in the case are scheduled for today.

Prosecutors in the office of Manhattan U.S. Attorney Preet Bharara allege that Chiasson and Newman were part of a group of portfolio managers, analysts and technology company employees who traded stock tips in a conspiracy that operated from 2007 to 2009. The two earned more than $67 million in illicit profits by trading on inside information in Dell Inc. (DELL:US) and Nvidia Corp. (NVDA:US), prosecutors said. Both men have pleaded not guilty to the charges.

‘Tight-Knit’

The case is the latest chapter in a series of insider- trading cases that last month yielded a two-year prison sentence for the government’s highest-profile target, former Goldman Sachs Group Inc. (GS:US) Director Rajat Gupta. Gupta was convicted of insider trading for conspiring with Galleon Group LLC co-founder Raj Rajaratnam. The fund manager is serving a term of 11 years in prison.

Of the 72 people charged with insider trading by Bharara since August 2009, 69 people having pleaded guilty or were convicted at one of six trials. One man charged with Rajaratnam remains a fugitive.

Chiasson and Newman, the remaining two, are charged with conspiracy to commit securities fraud and five counts of securities fraud. The securities fraud counts each carry a prison term of as long as 20 years.

“This case describes a tight-knit circle of greed on the part of professionals willing to traffic in confidential information,” Bharara said when the charges were announced in January. “It was a circle of friends who essentially formed a criminal club, whose purpose was profit and whose members regularly bartered inside information.”

‘Intense Interest’

Before trial, Greg Morvillo and Reid Weingarten, lawyers for Chiasson, asked the judge to screen potential jurors, arguing that the case had garnered “intense interest” in the media because of the number of insider-trading prosecutions that preceded it.

Prosecutors argued such interviews were time-consuming and defense lawyers would end up “filling the jury box with persons of a particular type whom they believed to be well-disposed toward their clients.”

The 12 jurors and three alternates were selected Nov. 8 after two days of questioning by Sullivan, who told the panel the trial will take about five weeks.

Some of the prospective jurors interviewed and excused by Sullivan expressed strong views about Wall Street, the stock market and hedge funds.

“I dealt with a lot of them, they’re ruthless, they’ll pluck your eyes out,” a Rockland County man who operated his own hedge fund told Sullivan about rival hedge fund operators. “I had a hedge fund. I’ve seen so many rogue traders using inside information, that they screwed us.”

Son-in-Law

A woman who said her son-in-law is a hedge fund manager told Sullivan she didn’t think she could be fair to the defendants.

“I think that it’s things like this that makes it difficult for people who have hedge funds,” she said.

Sullivan, saying that both Chiasson and Newman are presumed innocent, asked how she would feel if it was her son-in-law who was accused of wrongdoing.

“What if he were charged?” Sullivan asked.

“He would not,” said the woman, who was excused from the jury.

Of the eight people charged in the case, six have pleaded guilty to insider trading and are cooperating with the U.S. including Jesse Tortora, a former Diamondback analyst; Spyridon “Sam” Adondakis, an analyst at New York-based Level Global; and Danny Kuo, a former analyst at Whittier Trust Co., a South Pasadena, California-based wealth-management company.

Defense lawyers said they expect Tortora to be the first witness for the government.

SAC Capital

Jon Horvath, a former technology analyst who was arrested with Newman and Chiasson, pleaded guilty on Sept. 28. During his plea, Horvath, who worked at a unit of Steven Cohen’s $14 billion hedge fund SAC Capital Advisors LP, admitted to passing nonpublic information to his portfolio manager. He is cooperating with the U.S.

In September, Horvath’s portfolio manager, Michael Steinberg, was put on leave after he was identified by two people familiar with the matter as an unindicted co-conspirator in the case. Steinberg hasn’t been accused of any criminal wrongdoing. His lawyer, Barry Berke, has declined to comment on the case.

During questioning of potential jurors on Nov. 7, a man who said he has worked at SAC for seven years told Sullivan he had read about the case and used to sit next to Steinberg at the hedge fund’s office. The man told the judge he didn’t know Horvath, Chiasson or Newman.

Sullivan asked the jury candidate if he could be fair to the defendants.

Awkward

“As a person I think I could be fair, but as a hedge fund employee it’s awkward for me to be involved” in a case that includes current and former colleagues, the man said. “I think it is the impression of a longtime employee of SAC sitting on a jury in this particular case.”

Later, outside of the man’s presence, Assistant U.S. Attorney Antonia Apps told the judge she opposed seating an SAC employee on the jury, especially someone who knows Steinberg

“He knows Michael Steinberg,” she said. “Mr. Steinberg is an unindicted co-conspirator and this man will be asked to assess his testimony.”

“It does sound inappropriate,” said Sullivan, who later dismissed the man from the jury.

The case is U.S. v. Newman, 12-00121, U.S. District Court, Southern District of New York (Manhattan).

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

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


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