SANTA ANA Calif. A former technology chief executive's attorney urged jurors on Thursday to reject claims by the U.S. securities regulators that his client traded on inside information in a scheme that enabled the man and his brother to reap about $260 million.
The Securities and Exchange Commission "ignored actual evidence" that failed to support its case of wrongdoing against former sTec Inc CEO Manouchehr Moshayedi, defense attorney Patrick Gibbs said during closing arguments in a trial in U.S. District Court in Santa Ana, California.
"The SEC's story consists of plucking words and phrases from emails and testimony and stringing together little snippets and phrases," Gibbs said.
But John Berry, an SEC attorney, told jurors that Moshayedi traded in a secondary offering of sTec's stock in 2009 while knowing a key customer's demand for a major flash memory product was less than expected.
He could have called off the offering once he had the non-public information, Berry said, but he "buried" the facts through a secret side deal.
"They were all lies to cover up the truth about what he knew that day," Berry said.
The end of the massive insider trading trial comes amid a push by SEC Chair Mary Jo White to strengthen enforcement and take more cases to trial.
It is the first SEC trial to go to a jury after the regulator suffered a loss in May, when jurors in New York cleared Nelson Obus, a fund manager at Wynnefield Capital Inc, and two others, of insider trading.
Filed in 2012, the case against Moshayedi centered on his plans to sell a large block of his stock holdings and those of his brother, Mark Moshayedi, who co-founded the company.
The offering was to coincide with sTec's second-quarter results and next-quarter guidance in August 2009.
The SEC said that before the offering, Moshayedi learned that demand from EMC Corp, sTec's largest customer, for its flash memory drive would be below expectations. EMC also told him it would not renew a $120 million supply contract, the SEC said.
Berry told jurors Moshayedi then persuaded EMC to buy more flash drives than it needed in the third quarter for an undisclosed discount the next quarter.
"He was laser-focused on making sure that guidance number was high enough," Berry said.
By the time investors learned the truth, Moshayedi and his family had made $260 million, he said.
But Gibbs argued the risk EMC might carry inventory was "clearly disclosed."
"You can't ignore facts and evidence and wish them away," he said.
The SEC also investigated sTec and Mark Moshayedi but told both in 2012 it would not bring a case against them. Western Digital Corp acquired sTec last year for $340 million.
Jury deliberations are expected to begin on Friday.
The case is Securities and Exchange Commission v. Moshayedi, U.S. District Court, Central District of California, No. 12-01179.
(Additional reporting by Nate Raymond in New York)