March 29, 2024

DealBook: Defense Opens Insider Trading Case With Attack on Witnesses

Anthony Chiasson, a co-founder of the Level Global Investors hedge fund, was not part of a group that shared insider information, his lawyer said.Mike Segar/ReutersAnthony Chiasson, a co-founder of the Level Global Investors hedge fund, was not part of a group that shared insider information, his lawyer said.

Jurors were presented with a stark choice in the insider trading trial of two former hedge fund managers. The defendants were either the senior links in a “corrupt chain” of Wall Street traders, or scapegoats for the criminal conduct of their subordinates.

On Tuesday, a jury heard opening arguments in the trial of Anthony Chiasson, a co-founder of the now-defunct Level Global Investors, and Todd Newman, a former portfolio manager of Diamondback Capital Management. They are accused of conspiring with six others to earn roughly $70 million from illegal trading in technology stocks.

The other six defendants have pleaded guilty and are cooperating with the prosecution. Two of the six, Jesse Tortora, a former Diamondback analyst, and Spyridon Adondakis, who goes by Sam, a former analyst at LevelGlobal, are expected to be the government’s main witnesses.

They “will paint a picture of a corrupt network of professionals who chose to break the rules and to trade on inside information all in order to make a quick buck,” said Richard C. Tarlowe, a prosecutor.

Yet the defense spent much of Tuesday attacking the credibility of the government witnesses. “The biggest mistake Todd Newman ever made, and the reason he’s sitting here today, is because he hired Jesse Tortora,” Stephen Fishbein, a lawyer representing Mr. Newman, said in his opening statement.

Todd Newman, once a portfolio manager, handled so much data in a day that he would not have been aware of any illegally obtained, his lawyer said.Charles Krupa/Associated PressTodd Newman, once a portfolio manager, handled so much data in a day that he would not have been aware of any illegally obtained, his lawyer said.

“Sam Adondakis is an easy, practiced liar,” said Reid H. Weingarten, a lawyer for Mr. Chiasson. “His word cannot be trusted.”

Early this year, federal prosecutors in Manhattan charged the eight Wall Street traders with participating in a “tight-knit circle of greed” that relied on secret financial information provided to them by corporate insiders at the computer company Dell and the chip maker Nvidia.

The trial, in Federal District Court in Manhattan before Judge Richard J. Sullivan, is expected to last six weeks. If convicted, the defendants could be sentenced to at least 25 years in prison, though they probably would receive far less time.

On Tuesday, prosecutors described how confidential information moved “across a corrupt chain of people” and ultimately into the hands of Mr. Chiasson, 39, and Mr. Newman, 47. That information, Mr. Tarlowe said, gave the defendants “an unfair advantage over honest investors who were playing by the rules.”

The prosecution previewed several pieces of evidence, including e-mails and instant messages among the defendants and their analysts. The communications, according to the government, suggest that in 2008 the managers had secret information about Dell’s gross margin numbers, crucial figures in its earnings release. With access to those inside numbers, Level Global made $50 million and Diamondback about $2.8 million by betting against Dell stock before the company released its earnings, the prosecution said.

Lawyers for the defense spent much of their opening statements trying to distance their clients from those accused of being their co-conspirators.

Mr. Tortora and Mr. Adondakis, with a few of the other defendants, worked together earlier in their careers as technology industry analysts at Prudential Equity Group in San Francisco. Mr. Weingarten, a lawyer for Mr. Chiasson, said that the group referred to themselves as “the clique” and likened themselves to “Fight Club,” a 1999 cult film about a secret, underground fight club.

“The first rule of the fight club is that there is no fight club,” Mr. Weingarten said, paraphrasing a famous line from the movie.

The clique “traveled together, partied together, drank together, vacationed in the Hamptons together,” he said. “They were very close, and they shared information as well.”

But neither Mr. Chiasson nor Mr. Newman was part of this clique, and they were far removed from the original sources of inside information, their lawyers insisted. Instead, the two defendants were depicted as upstanding, hardworking portfolio managers whose investments were grounded in legitimate research.

Both defendants processed so much data over the course of a trading day, their lawyers said, that they would not have been aware of improperly obtained data. To underscore that point, lawyers for Mr. Newman showed the jury a slide highlighting how in a given year, Mr. Newman made 32,222 trades, or roughly 128 trades a day, in the stocks of 366 companies.

The defense lawyers said that Mr. Tortora and Mr. Adondakis had falsely accused their clients to protect themselves. In November 2010, Mr. Tortora had lost his job at Diamondback and was living in Florida. When F.B.I. agents knocked on his door and presented him with evidence of insider trading, his only way out was to help the government, Mr. Fishbein, Mr. Newman’s lawyer, said.

“Make Todd Newman a scapegoat so Jesse Tortora does not have to face the consequences of crossing the line,” said he said.

Mr. Weingarten urged the jury, which includes a dog walker and a retired postal worker, not to resent the extraordinary wealth of Mr. Chiasson, who is worth tens of millions of dollars.

“It’s crazy how we pay people in our society,” Mr. Weingarten said. He noted that his “beloved” New York Yankees paid Alex Rodriguez many millions of dollars a year, only to pinch-hit for him this year in the bottom of the ninth inning of a playoff game.

“In 2007, he made A-Rod kind of money,” Mr. Weingarten said, referring to Mr. Chiasson. “I know you will not hold his economic success against him.”

A version of this article appeared in print on 11/14/2012, on page B11 of the NewYork edition with the headline: Defense Opens Insider Trade Case With Attack on Witnesses.

Article source: http://dealbook.nytimes.com/2012/11/13/defense-opens-insider-trade-case-with-attack-on-witnesses/?partner=rss&emc=rss

DealBook: Defense Opens Insider Trade Case With Attack on Witnesses

Anthony Chiasson, the former hedge fund manager, faces insider trading charges.David Karp/Associated PressAnthony Chiasson, the former hedge fund manager, faces insider trading charges.

Jurors were presented with a stark choice in the insider trading trial of two former hedge fund managers. The defendants were either the senior links in a “corrupt chain” of Wall Street traders, or scapegoats for the criminal conduct of their subordinates.

On Tuesday, a jury heard opening arguments in the trial of Anthony Chiasson, a co-founder of the now-defunct Level Global Investors, and Todd Newman, a former portfolio manager of Diamondback Capital Management. They are accused of conspiring with six others to earn roughly $70 million from illegal trading in technology stocks.

The other six defendants have pleaded guilty and are cooperating with the prosecution. Two of the six, Jesse Tortora, a former Diamondback analyst, and Spyridon Adondakis, who goes by Sam, a former analyst at LevelGlobal, are expected to be the government’s main witnesses.

They “will paint a picture of a corrupt network of professionals who chose to break the rules and to trade on inside information all in order to make a quick buck,” said Richard C. Tarlowe, a prosecutor.

Yet the defense spent much of Tuesday attacking the credibility of the government witnesses. “The biggest mistake Todd Newman ever made, and the reason he’s sitting here today, is because he hired Jesse Tortora,” Stephen Fishbein, a lawyer representing Mr. Newman, said in his opening statement.

“Sam Adondakis is an easy, practiced liar,” said Reid H. Weingarten, a lawyer for Mr. Chiasson. “His word cannot be trusted.”

Early this year, federal prosecutors in Manhattan charged the eight Wall Street traders with participating in a “tight-knit circle of greed” that relied on secret financial information provided to them by corporate insiders at the computer company Dell and the chip maker Nvidia.

The trial, in Federal District Court in Manhattan before Judge Richard J. Sullivan, is expected to last six weeks. If convicted, the defendants could be sentenced to at least 25 years in prison, though they probably would receive far less time.

On Tuesday, prosecutors described how confidential information moved “across a corrupt chain of people” and ultimately into the hands of Mr. Chiasson, 39, and Mr. Newman, 47. That information, Mr. Tarlowe said, gave the defendants “an unfair advantage over honest investors who were playing by the rules.”

The prosecution previewed several pieces of evidence, including e-mails and instant messages among the defendants and their analysts. The communications, according to the government, suggest that in 2008 the managers had secret information about Dell’s gross margin numbers, crucial figures in its earnings release. With access to those inside numbers, Level Global made $50 million and Diamondback about $2.8 million by betting against Dell stock before the company released its earnings, the prosecution said.

Lawyers for the defense spent much of their opening statements trying to distance their clients from those accused of being their co-conspirators.

Mr. Tortora and Mr. Adondakis, with a few of the other defendants, worked together earlier in their careers as technology industry analysts at Prudential Equity Group in San Francisco. Mr. Weingarten, a lawyer for Mr. Chiasson, said that the group referred to themselves as “the clique” and likened themselves to “Fight Club,” a 1999 cult film about a secret, underground fight club.

“The first rule of the fight club is that there is no fight club,” Mr. Weingarten said, paraphrasing a famous line from the movie.

The clique “traveled together, partied together, drank together, vacationed in the Hamptons together,” he said. “They were very close, and they shared information as well.”

But neither Mr. Chiasson nor Mr. Newman was part of this clique, and they were far removed from the original sources of inside information, their lawyers insisted. Instead, the two defendants were depicted as upstanding, hardworking portfolio managers whose investments were grounded in legitimate research.

Both defendants processed so much data over the course of a trading day, their lawyers said, that they would not have been aware of improperly obtained data. To underscore that point, lawyers for Mr. Newman showed the jury a slide highlighting how in a given year, Mr. Newman made 32,222 trades, or roughly 128 trades a day, in the stocks of 366 companies.

The defense lawyers said that Mr. Tortora and Mr. Adondakis had falsely accused their clients to protect themselves. In November 2010, Mr. Tortora had lost his job at Diamondback and was living in Florida. When F.B.I. agents knocked on his door and presented him with evidence of insider trading, his only way out was to help the government, Mr. Fishbein, Mr. Newman’s lawyer, said.

“Make Todd Newman a scapegoat so Jesse Tortora does not have to face the consequences of crossing the line,” said he said.

Mr. Weingarten urged the jury, which includes a dog walker and a retired postal worker, not to resent the extraordinary wealth of Mr. Chiasson, who is worth tens of millions of dollars.

“It’s crazy how we pay people in our society,” Mr. Weingarten said. He noted that his “beloved” New York Yankees paid Alex Rodriguez many millions of dollars a year, only to pinch-hit for him this year in the bottom of the ninth inning of a playoff game.

“In 2007, he made A-Rod kind of money,” Mr. Weingarten said, referring to Mr. Chiasson. “I know you will not hold his economic success against him.”

Article source: http://dealbook.nytimes.com/2012/11/13/defense-opens-insider-trade-case-with-attack-on-witnesses/?partner=rss&emc=rss

DealBook: A Crucial Witness in Rajaratnam Trial Receives Probation

Rajiv Goel was sentenced on conspiracy and and securities fraud charges in New York on Monday.Peter Foley/Bloomberg NewsRajiv Goel was sentenced on conspiracy and and securities fraud charges in New York on Monday.

A former Intel executive who leaked secret information about his employer to Raj Rajaratnam, the fallen hedge fund billionaire, avoided prison on Monday when a judge sentenced him to two years’ probation.

The former executive, Rajiv Goel, provided prosecutors with extensive assistance in prosecuting Mr. Rajaratnam. During the hedge fund titan’s trial in 2011, Mr. Goel was one of the three crucial government witnesses who testified against him.

The other two witnesses — Anil Kumar, a former McKinsey Company executive, and Adam Smith, a Harvard-educated former Galleon Group trader — also received probationary sentences. Mr. Rajaratnam is now serving an 11-year sentence at a federal prison in Massachusetts.

Judge Barbara S. Jones, who sentenced Mr. Goel in Federal District Court in Manhattan, said that she had given him probation because of his extraordinary help in building a case against Mr. Rajaratnam and his essential testimony during the trial. She also noted that he had already paid a price for his crimes.

“You showed good sense in deciding to cooperate,” the judge said. “You have already been punished in the sense of the shame you feel for your family and your having lost your career.”

The United States attorney’s office in Manhattan has charged 70 people with insider trading crimes since 2009. Of those, 64 have either pleaded guilty or been convicted at trial.

Many of the defendants served as pawns in the sprawling insider trading conspiracy orchestrated by Mr. Rajaratnam, who ran the hedge fund Galleon Group. At the height of his powers, Mr. Rajaratnam managed more than $7 billion and was considered one of Wall Street’s savviest stock pickers.

Mr. Goel and Mr. Rajaratnam had stayed in touch since their days as classmates at the Wharton School at the University of Pennsylvania.

Their paths subsequently diverged. While Mr. Rajaratnam became a hedge fund giant, Mr. Goel was an unsatisfied middle manager at Intel. Mr. Goel, a native of Mumbai, India, envied the success and power of his old business school pal.

Mr. Rajaratnam lured Mr. Goel into his insider trading conspiracy by bestowing favors upon Mr. Goel. He lent him about $600,000. He made about $750,000 trading — often illegally — in Mr. Goel’s brokerage account. At the same time, he would press Mr. Goel for confidential information about Intel.

Eventually, Mr. Goel succumbed to Mr. Rajaratnam’s cajoling, giving him advance word of Intel’s financial results and a major investment that the chip maker had planned to make, allowing his old friend to earn hundreds of thousands of dollars in illegal profits.

At Monday’s sentencing, David Zornow, a lawyer for Mr. Goel, called Mr. Rajaratnam a “master manipulator” and “clever seducer” who played his client “like a fiddle.”

Federal authorities investigating Galleon had secretly recorded telephone calls between Mr. Rajaratnam and Mr. Goel. The conversations revealed not only a close friendship but also the swapping of secret information about Intel. The two were arrested on the same day in October 2009.

While Mr. Rajaratnam fought the charges, a number of his ostensible tipsters, including Mr. Goel, pleaded guilty and helped the government in its prosecution.

The 54-year-old Mr. Goel, who lives in Palo Alto, Calif., has not worked since Intel fired him after his arrest. Appearing in federal court on Monday and accompanied by his wife, Mr. Goel pleaded for leniency in a brief statement that he read to Judge Jones.

“I had a serious lapse of judgment and good sense and I deeply apologize,” said Mr. Goel, speaking in a soft mumble. “I hope that I am given another chance to repair the harm that I have caused and am deeply ashamed for the mistakes that I have made.”

Article source: http://dealbook.nytimes.com/2012/09/24/a-key-witness-in-rajaratnam-trial-receives-probation/?partner=rss&emc=rss

DealBook: A Key Witness in Rajaratnam Trial Is Set to Be Sentenced

A disgraced former Intel executive whose testimony helped convict the hedge fund billionaire Raj Rajaratnam of insider trading crimes deserves a lenient sentence because of his cooperation with the government, federal prosecutors said on Friday.

In a letter to Judge Barbara Jones, the United States attorney’s office in Manhattan praised the cooperation of Rajiv Goel, the former Intel executive.

“Goel substantially helped the Government secure a conviction in one the most significant and high-profile insider trading trials in history,” the letter said. “From the first day of Goel’s cooperation through the present, Goel has been a very important, straightforward, and extraordinarily helpful cooperating witness.”

Mr. Goel, 54, is set to be sentenced on Wednesday in Federal District Court in Manhattan. He was one of three main government witnesses who pleaded guilty to conspiring with Mr. Rajaratnam in a far-reaching insider trading conspiracy and then testified against him during his trial.

The other two witnesses have already been sentenced and were spared prison time. Anil Kumar, a former McKinsey executive, and Adam Smith, a former trader at Mr. Rajaratnam’s hedge fund Galleon Group, were both given probationary sentences because of their extensive cooperation.

Mr. Goel met Mr. Rajaratnam while the two were business-school students at the Wharton School of the University of Pennsylvania. Mr. Rajaratnam lured Mr. Goel into his insider trading conspiracy by bestowing favors upon his old friend, including executing profitable — and illegal — trades in Mr. Goel’s Charles Schwab brokerage account. Eventually, Mr. Goel gave Mr. Rajaratnam advance word of Intel’s quarterly earnings results.

“He knew that it was wrong for him to do so and regrets the decision that he made at the time, not only because of the negative consequences that he has justifiably suffered as a result of that decision, but also because of his betrayal of Intel, a company that had vested so much trust in him over the years,” wrote David Zornow, a lawyer for Mr. Goel, in his letter to Judge Jones.

At trial, Mr. Goel proved an effective witness, walking the jury through secretly recorded telephone calls during which he and Mr. Rajaratnam exchanged confidential information about Intel.

“During his testimony, Goel was contrite, truthful, and direct about his criminal conduct,” the government’s letter said.

The government’s letter to Judge Jones indicates that Mr. Goel has continued to help the government since Mr. Rajaratnam’s conviction in May 2011. It says that as recently as July 30, 2012, Mr. Goel spoke with prosecutors to provide information about certain trades in the Galleon case that continue to be investigated.

Mr. Zornow, the lawyer for Mr. Goel, asked Judge Jones to spare his client a prison term and sentence him to probation.

“Mr. Goel has already paid a hefty price for his involvement with Mr. Rajaratnam, in terms of his career prospects and his personal finances, not to mention the toll that the case has exacted on his family,” said Mr. Zornow. “Any sentence of incarceration would delay Mr. Goel’s efforts to rebuild his career, and would limit his ability to support those people who depend on him.”

Separately, an appeal of Mr. Rajaratnam’s conviction has been scheduled to be heard by the Court of Appeals for the Second Circuit on Oct. 25.

Article source: http://dealbook.nytimes.com/2012/09/07/a-key-witness-in-rajaratnam-trial-is-set-to-be-sentenced/?partner=rss&emc=rss