Ex-SAC manager pleads guilty to insider trading

NEW YORK Thu Apr 28, 2011 2:29pm EDT

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NEW YORK (Reuters) - A former SAC Capital portfolio manager who prosecutors said scrambled to toss incriminating evidence into garbage trucks pleaded guilty to insider trading.

Donald Longueuil, 35, is the latest to admit wrongdoing in a probe into illegal trading on corporate secrets leaked by consultants working for so-called expert network firms that help hedge funds obtain information about public companies.

He is the second former employee of the $12 billion hedge fund founded by Steven A. Cohen to plead guilty to an insider trading charge this year. SAC has not been implicated in the probe.

In the past two years, roughly 40 people have been accused of wrongdoing in various insider trading rings uncovered during the probe of Galleon Group hedge fund founder Raj Rajaratnam.

More than two dozen people have pleaded guilty, including three in the last eight days.

At a hearing on Thursday before U.S. District Judge Jed Rakoff, Longueuil said he bought shares in Marvell Technology Group Ltd after receiving a tip about the chipmaker's revenue and margins from Samir Barai, a former Citigroup Inc hedge fund manager who had started his own firm.

While the government dropped an obstruction of justice count, Longueuil admitted that he had disposed of a flash drive and hard drives "relevant" to the case.

"I am sorry for my actions, and for the pain I caused my family and loved ones," Longueuil said, choking up. "I have learned a lot from my experience, and I look forward to applying these lessons as I move forward with my life."

Longueuil pleaded guilty to one count each of securities fraud and conspiracy. He could face between three years and 10 months and four years and 9 months in prison at his July 29 sentencing. The Manhattan resident will forfeit $1.25 million.

Craig Carpenito, a partner at Alston & Bird LLP representing Longueuil, declined to comment after the hearing in Manhattan.

Barai, who ran Barai Capital Management, has also been charged with insider trading. His lawyer, Evan Barr, declined to comment.

Rakoff showed a flash of anger after asking Longueuil to identify Barai by name, as Carpenito rose from his seat before his client answered. "Sit down, counsel!" the judge said.

FOUR GARBAGE TRUCKS

Prosecutors accused Longueuil of trading for Stamford, Connecticut-based SAC Capital Advisors LP on leaks about companies such as Marvell and rival chipmaker Nvidia Corp.

They said these leaks came from sources like Winifred Jiau, a consultant for expert network firm Primary Global Research LLC, as well as SAC analyst Noah Freeman and an unnamed co-conspirator. Longueuil worked in SAC's CR Intrinsic unit.

Prosecutors said phone taps recorded Longueuil admitting to Freeman that he had used pliers to destroy the flash and hard drives. He then walked 20 blocks in Manhattan at 2 a.m. to throw out the evidence in "random garbage trucks, different garbage trucks ... four different garbage trucks."

Freeman pleaded guilty in the case and cooperated with the government against his former friend Longueuil. Jiau pleaded not guilty to securities fraud and conspiracy charges.

Longueuil's plea came as jurors were in their fourth day of deliberations in Rajaratnam's insider trading trial.

The case is U.S. v. Longueuil, U.S. District Court, Southern District of New York, No. 11-cr-00161.

(Reporting by Jonathan Stempel in New York; Editing by Ted Kerr)

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