A lawyer for Level Global Investors LP co-founder Anthony Chiasson, on trial for insider trading, said there’s no evidence backing a prosecutor’s claim that Chiasson’s fellow hedge fund co-founder is a co-conspirator.
“Mr. Chiasson respectfully submits that the government has failed to establish by a preponderance of the evidence that Mr. Ganek was a member of the alleged conspiracy,” Greg Morvillo, a lawyer for Chiasson, said in a memo to U.S. District Judge Richard Sullivan, who is presiding over the case.
Assistant U.S. Attorney Antonia Apps told Sullivan that the government views Ganek as an unindicted co-conspirator during a Dec. 3 hearing outside the jury’s presence in federal court in Manhattan. The U.S. seeks to show jurors e-mails involving Ganek. Sullivan told lawyers that he will hold a hearing tomorrow to make a legal finding on whether Ganek is an unindicted co-conspirator.
Chiasson and Todd Newman, a former portfolio manager at Stamford, Connecticut-based Diamondback Capital Management LLC, are on trial accused of securities fraud and conspiracy for allegedly trading on inside information in Dell Inc. (DELL:US) and Nvidia Corp. (NVDA:US) The U.S. says the two made their trades based on illegal tips obtained from company insiders and provided by analysts who worked for them.
Both men have pleaded not guilty to the charges. Ganek hasn’t been charged with a crime. Ganek’s lawyer, John Carroll, said in a statement that there’s no evidence that Ganek knew about any inside information.
Morvillo said prosecutors allege that Spyridon “Sam” Adondakis, 41, a former technology analyst who worked for Chiasson at the New York-based fund, testified that he passed information to Chiasson and Ganek during an Aug. 11, 2008, meeting at the fund and an Aug. 27, 2008, telephone call. Adondakis has pleaded guilty and is cooperating with the U.S.
“The government’s theory that Mr. Ganek was a co- conspirator is contradicted by its own witness,” Morvillo said.
Morvillo said Adondakis testified that on Aug. 11, 2008, he met with Chiasson and Greg Brenner, an analyst at the fund, and shared with them “what has been referred to as the Dell Expected Value.” Brenner hasn’t been accused of wrongdoing by the government.
“Mr. Adondakis testified that immediately following this meeting, Messers. Chiasson and Brenner brought the analysis into Mr. Ganek’s office and met with him,” Morvillo said.
The defense has evidence it hasn’t yet submitted that “demonstrates that Mr. Ganek was at his home in Southampton that day, not in Level Global’s office,” the lawyer said.
Morvillo also said Adondakis testified that he never told Mr. Ganek the source of his Dell information or that it was illegally obtained.
“Once again, the government’s own witnesses upends its argument,” Morvillo said. “The government’s conclusions with regard to those events are firmly undercut by the totality of other evidence in the record, including their own witness’s testimony.”
Adondakis was the third cooperating witness to testify at the trial in a group that also included Jesse Tortora, a former analyst who worked for Newman.
Six men have pleaded guilty to swapping the illegal tips from insiders at technology companies as part of the insider- trading scheme.
Apps contends Ganek knew Adondakis was getting inside tips.
“There is substantial circumstantial evidence to support the inference, based on the preponderance standard, that Mr. Ganek did in fact that know Mr. Adondakis’s information came from sources inside those companies, and accordingly, Mr. Ganek is a co-conspirator,” she wrote in a filing yesterday.
Asked for comment about the government’s claims about his client, Carroll said: “The government says my client is a co- conspirator because of a meeting, a phone call and some loose language in e-mails. But David Ganek was not in the office the day of the meeting, there is no record of him being on the phone call and the key witness testified multiple times that he was not told about any inside information.”
The case is U.S. v. Newman, 12-cr-00124, U.S. District Court, Southern District of New York (Manhattan).
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