NEW YORK (Reuters) - A former Silicon Valley sales manager put company insiders together with hedge fund clients, knowing that corporate secrets would pass between them, federal prosecutors said at the start of his insider-trading trial.
James Fleishman “knew full well” he was facilitating insider trading by the hedge funds, which would pay his former employer Primary Global Research LLC tens or hundreds of thousands of dollars for special access, Assistant U.S. Attorney Antonia Apps told a Manhattan federal jury.
“This is a case about stock traders on Wall Street getting an illegal edge,” Apps said. “If you know tomorrow’s news today, you can make money, big money.”
Jay Nelson, a lawyer for Fleishman, countered that while others at or working with Primary Global may have been involved in improper activity, his client did not know it.
“Mr. Fleishman did his job honestly and honorably,” Nelson said. “Mr. Fleishman believed that these consultations were proper and appropriate, and that they were what made PGR a good business.”
Fleishman, 42, faces two conspiracy charges, in the fourth trial to result from the government’s sprawling insider trading probe that started in October 2009.
The other trials ended in convictions for all five defendants: Galleon Group hedge fund founder Raj Rajaratnam, former Galleon trader Zvi Goffer and two colleagues, and former Primary Global consultant Winifred Jiau.
Fleishman, of Santa Clara, California, pleaded not guilty to charges of conspiracy to commit securities fraud and conspiracy to commit wire fraud. His trial before U.S. District Judge Jed Rakoff in Manhattan is expected to last three weeks.
Federal prosecutors and FBI agents have been working for years on cases that suggest expert network companies such as Primary Global helped ferry illegal corporate information to investors seeking to boost their returns.
Prosecutors said Fleishman was part of these schemes, aiding in leaks from executives at companies such as Advanced Micro Devices Inc and Dell Inc.
As in the earlier trials, the government is expected to play recorded phone calls to try to prove its case. It has identified so-called co-conspirators who have not been charged but whom it believes helped Fleishman commit his crimes.
Among these are 14 people who have worked for or consulted for Mountain View, California-based Primary Global, including Chief Executive Unni Narayanan and former Chief Operating Officer Phani Saripella, court papers show.
Apps told jurors they would hear evidence that Fleishman put clients in touch with “popular” insiders like former Advanced Micro supply chain manager Mark Anthony Longoria and former Dell global supply manager Daniel DeVore, knowing they would leak financial details such as revenue or margins.
She also said Bob Nguyen, a former Primary Global consultant, would show Fleishman important financial information he received from such insiders.
Longoria, DeVore and Nguyen pleaded guilty and are cooperating in the probe, and are expected to testify.
The first witness for the government was Karl Motey, an independent consultant at Coda Group Inc in Los Altos, California and former semiconductor analyst.
Motey pleaded guilty to insider trading-related charges, and later gathered evidence for the government by recording phone calls and in-person meetings. He is expected to resume testifying on Thursday.
After jurors were excused, Fleishman’s other lawyer Ethan Balogh told the judge he may want Saripella to testify, so long as he can be shielded from prosecution over his testimony. Rakoff did not immediately rule.
Of the 50 defendants charged in the hedge fund probe, 47 pleaded guilty or were convicted. The others are Fleishman; Deep Shah, a former Moody’s Investors Service analyst and now a fugitive; and Stanley Ng, a former Marvell Technology Group Ltd accountant. Ng has yet to enter a plea.
The case is U.S. v. Fleishman, U.S. District Court, Southern District of New York, No. 11-00032.
Reporting by Jonathan Stempel, editing by Matthew Lewis and Carol Bishopric