Insider Trading—Today's Crime Wrap

CNBC's John Carney on Today's Arrests(CNBC) "Federal authorities arrested four suspects on insider trading charges involving a wide range of technology companies, escalating the recent crackdown on Wall Street hedge funds and expert networks. The arrests occurred Thursday in Boston, Massachusetts, Round Rock, Texas, Santa Clara and San Diego, California. The charges include four different counts of wire fraud and securities fraud. More arrests are expected in January."


4 Arrested in Insider Trading Investigation (NY Times DealBook) The arrests advance the government’s focus on so-called expert-network firms, which have emerged over the past decade as the research departments of large investment banks have retrenched. Another reason for their growth is Regulation Fair Disclosure, a decade-old Securities and Exchange Commission rule that requires publicly traded companies to disclose material information to all investors at the same time. That rule, known as Reg FD on Wall Street, left information-hungry hedge funds looking for new ways to gain an investment edge.

Meet Walter Shimoon (CNBC's NetNet) "According to Shimoon's profile on an online networking website, he is employed by a tech company called Vista Point Technologies, located in the San Francisco suburb of Milpitas, CA. Vista Point is a tech company specializing in "Optomechatronics" — which is techie jargon for a combination of optics and mechanical engineering. Vista Point itself is owned by Flextronics— a Fortune Global 500 Electronics Manufacturing Services provider, headquartered in Singapore. In his professional profile, Mr. Shimoon lists the following, among his specialties:"structuring creative win-win arrangements with customers."

"U.S. Unveils Charges Against Five in Insider-Trading Sweep" (Wall Street Journal) "U.S. Attorney Preet Bharara in Manhattan, whose office is prosecuting the case, said that "a corrupt network of insiders at some of the world's leading technology companies … sold out their employers by stealing and then peddling their valuable inside information." The consultants were allegedly paid more than $400,000, according to Ms. Fedaryck. According to Thursday's criminal complaint, some of the corporate executives who served as consultants to investors seemed to devote a great deal of time to their side work. Mr. Longoria, for example, participated in 40 phone calls with investors over a 60-day period in early 2009, according to an email message from Mr. Fleishman, the Primary Global executive, detailed in the criminal complaint." (* N.B. Be sure to check out the slightly gratuitous—yet very cool—interactive graphic.)

Today's Arrests: An International View [From The Financial Times] (FT) "US prosecutors on Thursday announced criminal charges against five people in connection with a long-running insider-trading investigation, accusing an “expert network” employee and company insiders of providing information to hedge funds. The allegations were filed in court papers by the office of Preet Bharara, the US attorney in Manhattan, and involve the revelation of secret information from technology companies Apple, Dell, Advanced Micro Devices, Flextronics International and Taiwan Semiconductor Manufacturing. Prosecutors allege that four company executives acted as consultants for Primary Global Research, an independent research firm, and provided non-public information to hedge funds and other clients of the firm."