Former Tech Workers Charged With Insider Trading
Former staff at Dell and AMD are facing further insider trading charges from US authorities
Federal regulators at the Security and Exchange Commission in the US have filed charges against six people, including former Dell and Advanced Micro Devices employees.
Most of the six charged were previously arrested on similar charges in December, and are part of a larger overall effort by the federal government to come down hard on insider trading, including instances involving high-tech companies.
The first shot was fired in October 2009, when investigators arrested a number of Wall Street traders and tech company executives – including 31-year IBM veteran Robert Moffat – in an insider trading scheme that prosecutors said collected more than $25 million (£15.5 million) in illegal profits.
The newest charges stem from an ongoing investigation into insider trading by hedge funds that reportedly began in November.
In the 3 February case, SEC officials arrested three former tech company employees and another person with contacts in several vendors who also worked as consultants for a firm called Primary Global Research.
According to investigators, the four tech employees – Mark Longoria, Daniel L. DeVore, Winifred Jiau and Walter Shimoon – were paid hundreds of thousands of dollars in consulting fees in most instances to work as expert consultants for Primary Global. In that capacity, the four were paid to give the firm and its clients expert advice, which could then be used to set investment directions.
However, the SEC alleges that all four – who investigators said worked for Primary Global without the knowledge of their tech company employers – offered non-public information about their companies or other companies they worked with.
The firm, hedge funds and other investors used the information – which included earnings numbers and performance data – to garner about $6 million (£3.7 million) in illegal profits, according to the SEC.
SEC officials said working for such an expert network is not illegal, but trading on such non-public information is.
“Company executives and other insiders moonlighting as consultants to hedge funds cannot blatantly peddle their company’s confidential information for personal gain,” Robert Khuzami, director of the SEC’s Division of Enforcement, said in a statement. “These PGR consultants and employees schemed to facilitate widespread and repeated insider trading by several hedge funds and other investment professionals.”
All four former tech company employees and two workers at the firm, Bob Nguyen and James Fleishman, were charged with insider trading, while Fleishman, Nguyen and Jiau were additionally charged with helping the others in their illegal actions.
According to the SEC, Longoria, as a manager in AMD’s desktop global operations group, had access to AMD sales figures and also acquired AMD financial numbers from a colleague. He gave this data with numberous Primary Global clients before they were announced publicly. Between January 2008 and March 2010, he collected more than $130,000 (£80,600) in consulting fees.
DeVore was a global supply manager at Dell, and gave investors non-public information regarding Dell’s internal sales forecasts as well as pricing and volume related to Dell’s purchases from its suppliers. He made about $145,000 (£90,000) between 2008 and 2010.
Shimoon, vice president of business development for components in the Americas at Flextronics, gained non-public information not only about Flextronics, but also such customers as Apple, Omnivision, and Research in Motion. Shimoon collected about $13,600 (£8,400) in fees from Primary Global between September 2008 to June 2010.
Primary Global used Jiau, who investigators had contacts at chip maker Marvell and other technology companies, as a “private” expert, making her available to a small group of firm clients, the SEC said. Jiau gave those clients financial results to a number of companies before those results were made public. Between September 2006 and December 2008, she received more than $200,000 (£124,000) in consulting fees.
Fleishman and Nguyen are accused of receiving specific inside information from the consultants and passing the it onto Primary Global clients.
Longoria, Jiau, Shimoon and Fleishman reportedly had previously been arrested and charged in the case, and DeVore and Nguyen have pleaded guilty to their roles in the insider trading scheme.