Analyst Tells of FBI Threats In Insider-Trading Probe
By: John Kinnucan, an independent analyst, said the FBI approached him and said, "there was a very large insider trading ring investigation that they were conducting and one of my clients was a focus of the probe and they wanted my help in basically incriminating this individual."
The FBI told Kinnucan not to disclose the name of the individual or he would be guilty of obstruction of justice, and went on to say that they needed to hear from him within 48 hours or there would be trouble, he told CNBC's "The Strategy Session" on Tuesday.
He did not get back to them, but added that "my business has been destroyed" because of the investigation.
Kinnucan sent out an email to his clients disclosing the FBI visit:
"Today two fresh faced eager beavers from the FBI showed up unannounced (obviously) on my doorstep thoroughly convinced that my clients have been trading on copious inside information. (They obviously have been recording my cell phone conversations for quite some time, with what motivation I have no idea.) We obviously beg to differ, so have therefore declined the young gentleman's gracious offer to wear a wire and therefore ensnare you in their devious web."
"It reminds me a little of Arthur Anderson. If a company's been indicted they're out of business," Kinnucan said, adding, "I haven't been indicted but it's a distinction without a difference in this case."
Kinnucan's business is generally known in the business as channel checks where he has a vast network of people (mostly at private resellers, value-added resellers) who keep him abreast of production level changes or design wins.
One implication of these FBI probes, according to Kinnucan, could be to prohibit channel checks.
"It's impossible to be an analyst on Wall Street unless you have an expert network. I know that my contacts at these private companies for instance are having lunch on a regular basis with analysts from Jeffries, Morgan Stanley and Goldman Sachs," he said.
"It's interesting to me that this stuff has been going on for years now and you can see it everyday," Kinnucan said.
In addition to Kinnucan, three hedge funds—Diamond Capital Management, Level Global Investors and Loch Capital Management—were raided on Monday afternoon by the FBI in connection with its massive insider trading investigation..