* Of 2 ex-SAC employees charged, 1 is cooperating in case
* Barai Capital head and analyst also charged
* SAC says "outraged" by activities of former employees
* Part of probe of so-called expert networking firms (Adds link to second Factbox)
NEW YORK, Feb 8 (Reuters) - Two people who once worked for billionaire trader Steven A. Cohen's SAC Capital Advisers were charged with insider trading, drawing the $12 billion hedge fund firm further into a high-profile U.S. investigation.
Prosecutors on Tuesday accused the two former employees, among four new defendants charged with insider trading, with receiving corporate secrets while working at SAC. The firm itself has not been charged with any wrongdoing.
The government has been investigating current and former SAC employees, sources have told Reuters, since prosecutors announced a huge insider trading case involving Galleon Group hedge fund founder Raj Rajaratnam in October 2009.
A number of SAC's former analysts and traders were questioned over the course of the Galleon investigation, but none had been charged in that case for their activities at the Stamford, Connecticut-based fund.
The latest charges were announced by federal prosecutors investigating ties between hedge funds and consultants for so-called expert networking firms -- businesses that match hedge funds seeking information with industry consultants.
One of the former SAC employees, Noah Freeman, agreed to plead guilty and is cooperating with the investigation, prosecutors announced Tuesday. Freeman's lawyer, Ben Rosenberg of Dechert LLP, did not return calls seeking comment.
The other former SAC employee, Donald Longueuil, was arrested Tuesday morning at his Manhattan home on charges of conspiracy and obstruction of justice. (Factbox-Who's who in the latest insider trading arrests [ID:nN08283464]; Factbox-Links to SAC Capital in the insider trading probe [ID:nN0892153])
During a brief appearance in U.S. District Court in New York, a magistrate judge approved Longueuil's release on $1.5 million bond. His lawyer, Craig Carpenito of Alston & Bird LLP, declined to comment.
SAC said it is cooperating with the government probe. A spokesman for Cohen said the high-profile hedge fund manager was "outraged by the alleged actions of two former employees" and noted SAC had fired both Freeman and Longueuil in 2010.
The government announced charges on Tuesday against two others: hedge fund manager Samir Barai and an analyst who worked at his fund, Jason Pflaum.
Barai, a former Citigroup hedge fund manager who left to launch Barai Capital Management, surrendered to FBI agents. A judge permitted his release on $1 million bond. Barai's lawyer, Evan Barr of Steptoe & Johnson LLP, declined to comment.
Pflaum has agreed to plead guilty and like Freeman is cooperating with the investigation. Pflaum's lawyer, Michael Grudberg of Stillman, Friedman and Shechtman PC, declined to comment.
Since November, prosecutors have charged more than a dozen people in this newest crackdown on insider trading in the $1.9 trillion hedge fund industry.
Tuesday's charges mark the expansion of the probe beyond expert networking firm consultants and employees to hedge fund employees suspected of receiving secret tips on technology stocks.
'VERGING ON CORRUPT BUSINESS MODEL'
The criminal complaint, unsealed by prosecutors in Manhattan, paints a picture of four hedge fund employees obtaining and sometimes sharing confidential information provided by consultants, some of whom worked for California expert network firm Primary Global Research (PGR).
Manhattan U.S. Attorney Preet Bharara said at a news conference that the investigation had raised serious questions about the expert network industry and revealed the potential for widespread abuse.
"Given the scope of the allegations to date, we are not talking simply about the occasional corrupt individual. We are talking about something verging on a corrupt business model," Bharara said.
One former PGR consultant, Winifred Jiau, who was accused of tipping Barai and Freeman about Marvell Technology Group (MRVL.O) earnings, was again denied bail on Tuesday in her first New York court appearance since her December arrest in California. Her lawyer, Fred Hafetz of Hafetz Necheles & Rocco, said "she looks forward to her day in court."
Authorities also alleged Barai and Longueuil sought to conceal their activities from investigators by destroying documents, emails and computer records. For instance, prosecutors said that in a recorded conversation, Longueuil told Freeman he had destroyed a "log," meaning a flash drive, after reading about the investigation in a media report. (Late-night search for garbage truck [ID:nN08170239])
In a related action, the Securities and Exchange Commission filed civil securities fraud charges against the defendants.
In court papers, neither prosecutors nor regulators identified SAC Capital or the other hedge funds. But people familiar with the investigation confirmed the identities of some of funds where the men had worked.
Freeman worked in SAC's Boston office from June 2008 until early 2010. Longueuil worked in an SAC Capital office in New York from July 2008 to June 2010. Freeman had also worked as a tech analyst with Sonar Capital, which is in the same building as SAC Capital's Boston branch.
A key cooperating witness in the Galleon investigation is Richard Choo-Beng Lee, a former SAC Capital analyst. Lee, who hasn't worked at SAC Capital for many years, is required under a plea deal to tell prosecutors about any insider trading he may have committed while working at SAC, court records show.
The case is USA vs. Samir Barai and Donald Longueuil, U.S. District Court, Southern District of New York, No. 11-332. (Additional reporting by Martha Graybow, Jonathan Stempel, Emily Chasan and Svea Herbst-Bayliss; Editing by Gary Hill)