Daniel Barry for The New York TimesPreet S. Bharara, the United States attorney in Manhattan.
A hedge fund manager from a prominent Denver family is expected to plead guilty on Friday to insider trading charges.
Bo K. Brownstein, the head of Big 5 Asset Management and a former banker at Credit Suisse in New York, is expected to appear in Federal District Court in Manhattan and admit to making illegal profits by trading on a confidential stock tip about a corporate merger, according to two people briefed on the case who requested anonymity because they were not authorized to discuss it.
His lawyer, Gary P. Naftalis, declined to comment.
Mr. Brownstein’s guilty plea would continue a spate of successful insider trading prosecutions brought by Preet S. Bharara, the United States attorney in Manhattan. Last week, Raj Rajaratnam, the former hedge fund manager, was sentenced to 11 years in prison, the longest insider trading sentence ever imposed.
The case against Mr. Brownstein was far more discrete than Mr. Rajaratnam’s sprawling conspiracy. According to federal prosecutors, it originated with a single stock tip from H. Clayton Peterson, a former director of Mariner Energy, based in Denver, who told his son about a forthcoming $2.7 billion takeover of Mariner by the Apache Corporation in April 2010.
The son, Drew Peterson, a money manager, traded on the tip and earned about $150,000. He also passed the news to his close friend Mr. Brownstein, at first during a workout at their gym. In the days before the deal was announced, Mr. Brownstein loaded up on Mariner shares and options, according to court papers.
Federal prosecutors have not yet identified Mr. Brownstein in its court filings, referring to him only as a co-conspirator of the Petersons. The government’s complaint said that the co-conspirator earned more than $5 million in illegal profits for his fund and his relatives.
Both of the Petersons pleaded guilty to insider trading crimes in August. Earlier this month, a federal judge sentenced Clayton Peterson to two years of probation, meaning no prison time. Drew Peterson has not yet been sentenced.
The case has shocked Denver’s business community. Mr. Brownstein, 35, is the son of Norman Brownstein, a Denver lawyer and a longtime power broker in state and national Democratic politics. Bo Brownstein bought shares of Mariner for his father’s account without his father’s knowledge, according to people briefed on the case.
Clayton Peterson spent 33 years at Arthur Andersen, the now-defunct accounting firm. He ran the firm’s Denver office and served on a number of corporate and philanthropic boards in the city.
Bo Brownstein, a graduate of Columbia Business School, had lofty ambitions for his fledgling fund. Big 5 started with $50 million, but he had told prospective investors that he hoped to raise as much as $1 billion. In a press release last year announcing the addition of a real estate investment vehicle, Big 5 described itself as “a premier Denver-based alternative asset management firm.”
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