| NEW YORK
NEW YORK Feb 19 California hedge fund manager
Doug Whitman, the first defendant in the broad U.S. crackdown on
insider trading to take the stand in his own defense, on
Wednesday failed to persuade a federal appeals court to overturn
The 2nd U.S. Circuit Court of Appeals rejected Whitman's
arguments that the insider trading conviction was tainted
because the trial judge instructed jurors improperly and refused
to admit various testimony from experts and witnesses.
Whitman, 56, the founder of Whitman Capital LLC in Menlo
Park, California, was sentenced in January 2013 to two years in
prison on two counts each of securities fraud and conspiracy for
his roles in two trading schemes from 2006 to 2009.
Prosecutors said one scheme led to more than $900,000 of
illegal profit from trading the shares of Google Inc
and video-conferencing company Polycom Inc, and the
other involved "soft-dollar" payments made to win tips on and
then trade in chipmaker Marvell Technology Group Ltd.
The government said Whitman tried to profit illegally with
information from insiders like Roomy Khan, a former Intel Corp
employee who passed tips on Google and Polycom, and
Karl Motey, a consultant who passed tips about Marvell.
At Whitman's sentencing, U.S. District Judge Jed Rakoff in
Manhattan said he believed Whitman had "repeatedly perjured
himself" on the witness stand and had been "willfully, blatantly
aware" that he was conducting insider trading. Whitman has been
free on bail during his appeal.
In its ruling on Wednesday, the 2nd Circuit said Rakoff did
not err in giving jurors a "conscious avoidance" instruction,
letting them consider whether Whitman was aware of but ignored a
high probability that wrongdoing was afoot.
Jurors, it said, could reasonably conclude that Whitman had
been "deliberately closing his eyes" as to whether Khan, whom he
called "Ms. Google," and Motey were passing inside information.
"Whitman responded to warning signs about the nature of Khan
and Motey's tips not with skepticism but with advice on how
better to play fast and loose," the court said.
Carter Phillips, a partner at Sidley Austin who represented
Whitman in the appeal, was not immediately available to comment.
A spokeswoman for U.S. Attorney Preet Bharara in Manhattan
declined to comment.
The appeals court said Rakoff also acted reasonably in
blocking a Wall Street analyst and a financial consultant
familiar with general industry practices from opining about the
specific facts of Whitman's case.
It also said Rakoff correctly excluded a deposition in which
former Polycom executive Sunil Bhalla, who did not testify at
trial by invoking his constitutional right against
self-incrimination, denied passing inside tips to Whitman.
Khan and Motey pleaded guilty and cooperated with
prosecutors in the insider trading probe, which has led to about
79 guilty pleas and convictions.
Among those convicted have been Galleon Group hedge fund
founder Raj Rajaratnam, former McKinsey & Co global managing
director Rajat Gupta, and former SAC Capital Advisors LP
portfolio manager Mathew Martoma.
Khan was also a central figure in the case against
Rajaratnam. The probe was unveiled in October 2009.
The case is U.S. v. Whitman, 2nd U.S. Circuit Court of
Appeals, No. 13-491.