August 9, 2022

DealBook: Another Insider Trading Trial Is Set to Begin

Federal District Court in Lower ManhattanJohn Marshall Mantel for The New York TimesFederal District Court in Lower Manhattan.

Expert network firms were once an obscure pocket of Wall Street, an elite service for aggressive money managers looking for an investment edge.

Today, these businesses find themselves in the middle of the government’s multiyear investigation into insider trading. And on Wednesday, they are expected to take center stage in a federal courtroom in Manhattan.

Winifred Jiau, a former consultant at the expert network firm Primary Global Research, is set to go on trial on charges that she helped pass secret corporate information to her hedge fund clients. If convicted, she faces up to 25 years in prison.

Her former employer, Primary Global, is the expert network firm hardest hit by the investigation. Federal prosecutors have charged at least seven people connected to the firm, which is based in Mountain View, Calif., with insider trading-related crimes.

On Tuesday, a spokesman for Primary Global said that the firm had closed its offices in the last month and disconnected its toll-free phone line, but the business remained open. The spokesman said that the company remained in business, but declined to offer any specifics.

Expert network firms emerged over the last decade to supplement traditional Wall Street research. Firms like the Gerson Lehrman Group and Guidepoint Global employ consultants that match money managers with industry experts. In some instances, they connect investors with public company employees.

Thirteen people connected to expert network firms have been charged with insider trading-related crimes, including Ms. Jiau. Of the 13 charged, eight have pleaded guilty.

Federal prosecutors say that in her role as an expert network consultant, Ms. Jiau crossed the line by selling secret information about technology companies, including Nvidia and Marvell Technology, to her hedge fund clients. She earned about $200,000 for her services, the government said.

Ms. Jiau is also accused of leaking confidential information about Nvidia, where she worked briefly as a contract employee in 2007.

At least one co-conspirator is expected to testify against Ms. Jiau. Sonny Nguyen, a former employee at Nvidia, pleaded guilty last week and is expected to tell the jury that he had provided Ms. Jiau with secret information about his company’s quarterly earnings in 2007 and 2008.

Some of the government’s strongest evidence at trial is expected to come from Samir Barai, who ran the hedge fund Barai Capital Management and also pleaded guilty last week to trading on illegal tips provided to him by Ms. Jiau.

He has been cooperating with federal prosecutors in building a case against Ms. Jiau.

Mr. Barai, who has poor hearing, often taped his telephone conversations so he could listen to them afterward. When the government raided Mr. Barai’s firm, it secured recordings of conversations between Mr. Barai and Ms. Jiau that ostensibly contain incriminating evidence. Those tapes are expected to be played during the trial.

Ms. Jiau is also accused of providing illegal tips to Noah Freeman, a former portfolio manager at SAC Capital, one of the largest hedge funds. Mr. Freeman has also pleaded guilty.

The inquiry into expert network firms is one piece of a broader investigation of insider trading by Preet S. Bharara, the United States attorney in Manhattan. Since he assumed the office in August 2009, 49 individuals have been charged with insider trading crimes, 39 of whom have either pleaded guilty or been convicted by a jury.

Ms. Jiau will be only the fifth of these defendants to take a case to trial.

Last month, Raj Rajaratnam, the head of the Galleon Group hedge fund and the most prominent figure in the insider trading investigation, was found guilty after a two-month trial. Zvi Goffer, a former Galleon employee, and two co-defendants are currently on trial before Judge Richard Sullivan in United States District Court for the Southern District of New York.

A 43-year-old native of Taiwan, Ms. Jiau settled in Northern California after earning a master’s degree at Stanford. Now a dual United States and Taiwanese citizen, Ms. Jiau resides in Fremont, Calif., with, apparently, her dog.

“We look forward to defeating this misguided prosecution and sending Ms. Jiau home to California and her beloved dog, Hunter,” said Joanna C. Hendon, a lawyer at Morgan, Lewis Bockius representing Ms. Jiau. (Ms. Hendon said that Hunter, a golden retriever, is being watched by friends of Ms. Jiau.)

Ms. Hendon, a former federal prosecutor, is representing Ms. Jiau as part of a court program that appoints lawyers to represent defendants financially unable to retain counsel in a criminal case.

Trying the case for the government are the assistant United States attorneys Avi Weitzman and David Leibowitz.

Ms. Jiau is being held at the Metropolitan Correctional Center in Lower Manhattan while awaiting trial. Judge Jed S. Rakoff, who is presiding over the case, revoked Ms. Jiau’s bail after prosecutors presented evidence that she was a flight risk.

Judge Rakoff, among the more charismatic judges on the federal bench, promises to add entertainment value to Ms. Jiau’s proceedings. In May at a pretrial hearing, he expressed disappointment that the two sides had entered into plea negotiations.

“I am so impressed with the level of lawyering in this case on both sides,” Judge Rakoff said. “I saw somewhere in press reports that the parties were talking settlement, and I personally hope that is not true because I am really looking forward to this trial.”

Azam Ahmed contributed reporting.

Insider Trading Defendants and Cases Charged Since August 2009

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