Level Global Investors LP co-founder Anthony Chiasson, convicted of an insider-trading scheme that reaped $72 million, asked a judge to give him less time in prison than the 13-year term called for by U.S. sentencing guidelines.
Lawyers for Chiasson, 39, called such a sentence “draconian” in a, April 29 court filing. They urged U.S. District Judge Richard Sullivan in Manhattan to impose an unspecified shorter prison term, saying the alleged crimes were “aberrant” and that Chiasson has led an “exemplary life.”
Defense lawyers Greg Morvillo and Reed Weingarten cited Chiasson’s charitable work, including his effort to save his Catholic Jesuit high school in Portland, Maine, from closure, the creation of a scholarship program for his alma mater, Babson College, and his contributions to the Robin Hood Foundation and the Michael J. Fox Foundation.
“Anthony Chiasson is an extraordinary man,” Morvillo and Weingarten said in a memo to Sullivan. “But for the conduct that brings him before the court, Anthony has led an exemplary life.”
Chiasson, who began his career on Wall Street at Solomon Brothers and left SAC Capital Advisors LP to start the hedge fund, is scheduled to be sentenced May 13.
While U.S. court officials said that based on non-binding guidelines Chiasson should serve 121 to 157 months in prison, his lawyers said the appropriate range is 78 to 97 months.
A Manhattan federal jury in December found Chiasson guilty of five counts of securities fraud and convicted former Diamondback Capital Management LLC portfolio manager Todd Newman of one count of conspiracy and four counts of securities fraud. Newman is scheduled to be sentenced May 2.
The U.S. alleged that the two portfolio managers were part of a “corrupt chain” of hedge-fund managers and analysts and insiders at technology companies who swapped and traded on illicit tips..
The U.S. said Level Global earned $68 million as a result of the insider trading based on material nonpublic information Chiasson received from Spyridon “Sam” Adondakis, a former Level Global analyst who worked for him.
Defense lawyers estimated the fund earned $11.7 million as a result of trading in the stocks of Dell Inc. (DELL:US) and Nvidia Corp. (NVDA:US) They disputed the government’s allegation that Chiasson based the transactions on illicit information and argued that federal sentencing guidelines allow prosecutors to inflate profits generated as a result of alleged crimes.
“There is only one reason the range is so high: the guidelines’ unrelenting predisposition to punish profit,” Morvillo and Weingarten said.
Morvillo and Weingarten also argued that Chiasson “should not be required to forfeit gains of any co-conspirators.” They said that the fund earned more than $21.6 million on trades by David Ganek, a Level Global co-founder who was ruled by Judge Sullivan to be an uncharged co-conspirator in the insider- trading scheme. Adondakis, who pleaded guilty, testified that he didn’t tell Ganek about the source of his tips. Ganek hasn’t been charged with wrongdoing.
“This court should not include Ganek’s personal gains in Mr. Chiasson’s forfeiture amount even though the court held there was evidence sufficient to find Ganek a co-conspirator,” Morvillo and Weingarten said.
“Fundamental fairness dictates that Mr. Chiasson should not have to forfeit money Ganek obtained while Ganek gets to keep it,” the defense lawyers wrote. “If, despite Adondakis’ testimony, the government still believes that Ganek is a co- conspirator, it can get any monies it believes to be tainted from Ganek himself.”
If the government wished to obtain assets from Ganek, “it has now and has always had the power to charge him, prove his guilt and require him to forfeit the monies,” Morvillo and Weingarten said. “There is no allegation that Mr. Chiasson had any claim to control over Ganek’s money; thus to make him forfeit it is to defy fundamental fairness.”
Morvillo said yesterday that he and Weingarten aren’t trying to implicate Ganek in wrongdoing.
“We have always maintained Mr. Chiasson’s innocence, therefore we are not now saying, nor have we ever said that we believe Mr. Ganek has done anything wrong,” Morvillo said in a phone interview.
John Carroll, Ganek’s lawyer, said his client has never been charged with any wrongdoing by the U.S.
“David’s trades were perfectly legal as is demonstrated by three facts: the case is over and the government did not charge him, the star witness testified that David wasn’t involved in any conspiracy and the lead FBI agent testified that David was never implicated,” Carroll said in a statement.
Chiasson’s lawyers argued that he deserves a sentence comparable to others convicted of insider trading, including former Goldman Sachs Group Inc. director Rajat Gupta, who was ordered to serve two years in prison, and former Primary Global Research LLC executive James Fleishman and Michael Kimelman, the co-founder of Incremental Capital LLC, who were both given 30- month prison terms.
In January, a federal appeals court allowed Gupta to remain free while he fights his conviction. Both Fleishman and Kimelman were recently released from prison.
The case is U.S. v. Newman, 1:12-cr-00121, U.S. District Court, Southern District of New York (Manhattan).
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