August 18, 2022

DealBook: Ex-SAC Capital Trader Aided Insider Inquiry

Federal District Court in Lower Manhattan.Craig Ruttle/Associated PressFederal District Court in Manhattan.

A former portfolio manager at the hedge fund SAC Capital Advisors testified in federal court on Friday that he had provided investigators with the names of more than a dozen individuals when he confessed to insider trading.

Noah Freeman, the former portfolio manager, told a jury that he sat down with law-enforcement officials at the end of last year and told them about crimes that he and others had committed.

“How many people did you tell the government about?” asked Avi Weitzman, a federal prosecutor.

“At least, in passing, more than a dozen,” responded Mr. Freeman, 35, a tall, athletic-looking Harvard College graduate. He did not identify whom he had discussed with the government.

He did tell the jury that trading on illegal stock tips at Sonar Capital, the hedge fund he worked at before joining SAC, was part of Sonar’s business model.

Mr. Freeman took the witness stand in Federal District Court in Manhattan in the trial of Winifred Jiau, a former consultant at a so-called expert network firm, which connect money managers with industry experts, including public company employees, for a fee.

Federal prosecutors have charged Ms. Jiau with knowingly facilitating the passing of secret information about technology businesses to hedge fund traders.

One of those traders was Mr. Freeman, a main government witness in its case against Ms. Jiau.

His testimony came about six months after two F.B.I. agents stopped him in the parking lot of the Winsor School, an elite private school in Boston, and played a tape recording of him, Ms. Jiau and another hedge fund manager exchanging confidential information.

Mr. Freeman left SAC in January 2010, and the hedge fund industry altogether, and was teaching an advanced economics course at the school. He no longer teaches there.

Mr. Freeman, who has pleaded guilty, faces up to 25 years in prison. But by helping the government gather evidence, he hopes to obtain a lesser sentence. Mr. Freeman’s cooperation helped federal prosecutors bring criminal charges against not only Ms. Jiau, but also three other hedge fund employees who were part of Mr. Freeman’s insider trading ring. The hedge fund employees — Donald Longueuil, formerly of SAC Capital; Samir Barai of Barai Capital Management; and Jason Pflaum, a colleague of Mr. Barai — have all pleaded guilty. Dressed in a dark suit, white shirt and red Hermès tie, Mr. Freeman spent only a little more than an hour on the witness stand before Judge Jed S. Rakoff dismissed the jury until Monday.

In that short time, he laid out for the jury his 10-year career. After a stint as a consultant at Bain Company, he said he joined Brookside Capital, the hedge fund arm of Bain Capital Partners, the Boston private equity firm. From there he moved to Sonar Capital, also a Boston hedge fund, where he said he spent three-and-a-half years.

Mr. Freeman said that he had no trading authority at Sonar but worked as an analyst gathering research and providing investment ideas to Neil Druker, the head of the fund. He said that trading on inside information at Sonar “was regularly employed as part of our business model.”

Neither Sonar nor Mr. Druker has not been charged with any wrongdoing. Mark Hyland, a lawyer for Sonar, said: “Freeman turned out to be a rogue, dishonest employee who acted without authority and deceived Sonar Capital. Freeman now continues his pattern of deception by falsely seeking to implicate others at Sonar in the hopes of obtaining a lighter sentence for his own criminal acts.”

It was at Sonar that Mr. Freeman said he had met Ms. Jiau. He testified that Ms. Jiau had provided him with the “complete financials” for the technology companies Marvell Technology Group and Nvidia, before they were publicly announced. The information, he said, was “extremely” helpful.

He left Sonar in early 2008 to start the Boston office for SAC, the giant Stamford, Conn.-based hedge fund run by the billionaire investor Steven A. Cohen. Mr. Freeman said that at SAC he had day-to-day trading authority and at his peak oversaw about $300 million of the fund’s money.

His testimony about his work at SAC was cut short when the trial broke for the day.

SAC has not been charged. A spokesman for the firm previously said Mr. Cohen had been “outraged” by Mr. Freeman and Mr. Longueil’s conduct.

To defuse a potential line of questioning on cross-examination, Mr. Weitzman, the prosecutor, asked Mr. Freeman about his past drug use.

He said he had smoked marijuana regularly for 10 years but stopped in late 2008. He also conceded using mushrooms once, in spring 2009.

“Only once,” he reiterated. “It was a terrible experience.”

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