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RPT-Tiny IR firm key to big trade in insider scandal
(Repeats story issued Oct. 19)
* Market Street little known outside Silicon Valley
* Firm employs 7 people, according to LinkedIn profile
* Google, Omniture, Netsuite among its clients
By Anupreeta Das and Clare Baldwin
NEW YORK/SAN FRANCISCO, Oct 19 (Reuters) - The tiny investor relations firm whose name has surfaced in the hedge fund insider trading scandal appears to have provided the tip that brought Galleon Group its most profitable trade, and is now also sparking the most questions.
Prosecutors have alleged that before Google Inc (GOOG.O) announced its second-quarter earnings in July 2007, a tipster told Galleon the Internet giant would announce earnings below market expectations, based on information received from an unidentified Market Street Partners employee.
Based on the tip, Galleon purchased about 1,000 put options in Google in July 2007, and shorted about 25,000 shares of the stock. The trade brought the hedge fund some $9 million in profits.
Last Friday, federal investigators brought criminal charges against Galleon founder Raj Rajaratnam and five others in what is the largest hedge fund insider trading case in history.
Authorities are poised to bring new cases, including against other financial professionals involved in insider trading, a person familiar with the matter told Reuters on Monday. [nN19480461]
"The Market Street employee provided the material, nonpublic information ... as part of his/her efforts to find hedge funds or other persons or entities willing to pay him/her for inside information in the future," according to the complaint by the U.S. Federal Bureau of Investigation.
Google is by far the biggest of about 60 companies listed on Market Street's website. A Google spokesman declined to comment on Market Street.
LITTLE KNOWN FIRM
Few public relations and investor relations firms outside Silicon Valley said they were familiar with the firm, whose office is in downtown San Francisco.
Market Street, which lists seven employees on its LinkedIn business profile, occupies the third floor of a three-storey brick building.
Employees at the neighboring offices described Market Street as being quiet and small, with employees preferring to take the stairs rather than the elevator. The median age is 32, according to LinkedIn data.
The firm's website lists four partners, including co-founders Carolyn Bass and JoAnn Horne, Senior Vice President Karen Haus-Moran and Vice President Linda Rothemund. Emails to all four partners seeking comment were not returned.
"As we've said publicly we were not given any advance notice," said one Market Street employee who declined to give her name when a reporter visited on Monday. "We have not been contacted by any law enforcement agencies. We are very willing and open to cooperating with any investigation but that's really all we can say at this point."
The employee concerned had not been identified in any of the complaints or by the firm itself, despite requests.
According to the U.S. Securities and Exchange Commission complaint, the informant at Market Street Partners, identified as the "Google Source," demanded payments of $100,000 to $150,000 per quarter to continue supplying information to a person identified as "Tipper A" in the complaint.
"Tipper A demurred and the Google Source stopped providing tips," the complaint said.
One Market Street client, speaking on condition of anonymity, said they used the firm only to handle the release of quarterly earnings reports, and found its services professional.
Companies often hire outside investor relations specialists to help prepare quarterly earnings reports, as well as investor roadshow presentations.
Market Street counts tech companies NetSuite Inc (N.N), DigitalGlobe Inc (DGI.N) and Omniture Inc OMTR.O among its clients.
Omniture was recently bought by Adobe Systems Inc (ADBE.O) for $1.8 billion. DigitalGlobe raised about $280 million in an initial public offering in May.
(Additional reporting by Emily Chasan in New York and Alexei Oreskovic in San Francisco; Editing by Richard Chang)
