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UPDATE 2-Guilty plea due in 'expert network' insider probe
April 27, 2011 / 6:44 PM / in 7 years

UPDATE 2-Guilty plea due in 'expert network' insider probe

* Donald Longueuil to plead guilty Thursday - prosecutor

* Don Chu in talks to plead guilty on conspiracy counts

* Insider trading probe focuses on expert network firms (Adds expected Longueuil guilty plea throughout)

By Jonathan Stempel

NEW YORK, April 27 (Reuters) - A former portfolio manager at Steven Cohen’s SAC Capital Advisers LP will plead guilty on Thursday to charges arising from a federal probe of insider trading, a prosecutor said at a court hearing.

Donald Longueuil, accused of receiving corporate secrets while working at SAC Capital, is expected to file a request changing his not guilty plea to guilty, Assistant U.S. Attorney David Leibowitz said at a Wednesday afternoon hearing.

“It is certainly my understanding” that a so-called “change-of-plea” application will be filed, Leibowitz told U.S. District Judge Jed Rakoff.

Separately, Don Ching Trang Chu, a former employee of a so-called expert network company, is in talks to enter his own guilty plea, lawyers said at a hearing earlier Wednesday before Rakoff in the same Manhattan federal courtroom.

The afternoon hearing concerned whether the government’s case against Longueuil’s co-defendant Winifred Jiau, a former consultant for expert network company Primary Global Research LLC, should proceed separately.

Rakoff said a Longueuil guilty plea would make that issue moot.

Another former SAC employee, analyst Noah Freeman, pleaded guilty to securities fraud and is cooperating with the government case against Longueuil, a one-time friend of Freeman‘s.

Craig Carpenito, an Alston & Bird LLP partner representing Longueuil, did not immediately return requests for comment.

GARBAGE TRUCKS

More than one dozen defendants have been charged or pleaded guilty since November as part of a federal crackdown on the solicitation of illegal stock tips from consultants working for so-called expert network firms. [ID:nN08283464]

These firms help hedge funds obtain information about public companies. Insider trading could result from trades made on leaks of material, nonpublic information.

Prosecutors accused Longueuil of securities fraud and conspiracy for trading on leaks by Jiau from insiders at chipmaker Marvell Technology Group Ltd (MRVL.O), and receiving leaks from Jiau on chipmaker Nvidia Corp (NVDA.O).

Longueuil was also charged with obstruction of justice. Prosecutors said phone taps show him admitting to Freeman to destroying a flash drive and two external hard drives, and then walking the darkened streets near his Manhattan home at 2 a.m. to look for garbage trucks in which to throw them out.

Stamford, Connecticut-based SAC, which invests roughly $13 billion, has not been implicated in the probe.

CHU IN TALKS, PLEADS NOT GUILTY

In the earlier proceeding before Rakoff, Chu pleaded not guilty to charges of conspiracy to commit securities fraud and conspiracy to commit wire fraud.

Chu, 57, waived his right to be charged by a grand jury. His lawyer James DeVita, a partner at Day Pitney LLP, said there would not have been “any advantage” to doing so.

The defendant entered his plea after Leibowitz told Rakoff there had been “extensive” plea negotiations, and that talks are “still ongoing.” A conference was set for June 28.

Prosecutors charged the Somerset, New Jersey, resident with passing tips to Richard Choo-Beng Lee, who ran a now-closed California hedge fund Spherix Capital LLC, beginning in 2008.

Lee and Ali Far, who also ran Spherix, pleaded guilty to trading on inside information in connection with a separate insider trading probe centered on Galleon Group founder Raj Rajaratnam. [ID:nN27139092]

Companies that were subjects of inside tips from Chu included chipmakers Atheros Communications Inc ATHR.O and Broadcom Corp BRCM.O and Canada’s Sierra Wireless Inc (SW.TO), the government has said.

Several others once affiliated with Mountain View, California-based Primary Global have been implicated in the insider trading probe.

Rajaratnam’s insider trading trial is in its eighth week. Jury deliberations began on Monday.

The cases are U.S. v. Longueuil, U.S. District Court, Southern District of New York, No. 11-cr-00161, and U.S. v. Chu in the same court, No. 10-mj-02625. (Reporting by Jonathan Stempel; Editing by Matthew Lewis and Tim Dobbyn)

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