March 28, 2024

DealBook: U.S. Charges Former Executive of Marvell With Fraud

Marvell Technology headquarters in Santa Clara, Calif.David Paul Morris/Bloomberg NewsMarvell Technology headquarters in Santa Clara, Calif.

Federal prosecutors announced charges on Wednesday against a former employee at the Marvell Technology Group, accusing him of participating in an insider trading scheme that funneled corporate secrets to hedge fund traders.

The former employee, Stanley Ng, was arrested on Wednesday at his home in Cupertino, Calif. He was charged with one count of conspiring to commit securities fraud.

“Stanley Ng and his co-conspirators traded inside information as casually as some people trade baseball cards,” Preet Bharara, the United States attorney for Manhattan, said in a statement. “Like so many others recently, he will now be held to account in a court of law.”

A lawyer for Mr. Ng did not immediately return a request for comment. Marvell has not been accused in any wrongdoing.

The arrest is the latest in a sweeping federal crackdown on insider trading. Since August 2009, the United States attorney in Manhattan has charged 52 people with insider-trading crimes. Of those, 48 have either pleaded guilty or been convicted by a jury.

At the center of many cases is the so-called expert networking industry, which acts as a matchmaker for employees of public companies and hedge funds. Mr. Ng, 42, is the 14th person to be charged with insider trading related to the use of such networks.

The first criminal trial involving an expert networking firm ended in June with the conviction of Winifred Jiau, a consultant at Primary Global Research. Ms. Jiau, prosecutors said, shuttled cash and corporate tidbits between company insiders and hedge fund traders. Her lawyer said Ms. Jiau, known as Wini, would appeal the verdict.

The charges against Mr. Ng were not surprising, after the former Marvell employee played a starring role at Ms. Jiau’s trial.

Ms. Jiau, according to testimony from former Nvidia employee Sonny Nguyen, recruited Mr. Ng and Mr. Nguyen to join an “investment club.” The condition for admittance was simple; the corporate employees must leak inside information to Ms. Jiau. They obliged her request, prosecutors said, turning over detailed earnings reports for Marvell and Nvidia ahead of their public release.

In turn, Ms. Jiau shared her own secret stock tips with the men, according to a complaint unsealed today in the United States District Court in Manhattan. She also invited the men to meals at the Cheesecake Factory restaurant and offered to treat them to “various free gifts,” according to the complaint.

The scheme heated up during the summer of 2008, prosecutors said, when Ms. Jiau sought another advance word on Marvell’s quarterly earnings. Ms. Jiau e-mailed Mr. Ng to see if he was available to chat. “Yes, call anytime,” Mr. Ng replied.

The two talked a few days later, each on cellphones. About two minutes after the call, Ms. Jiau contacted a hedge fund manager, Samir Barai. Ms. Jiau, prosecutors said, sold inside information to Mr. Barai and Noah Freeman, a former trader at SAC Capital Advisors. Mr. Freeman has said the illegal stock tips earned him and his funds millions of dollars.

Mr. Nguyen, the former Nvidia employee, has already pleaded guilty to one count of conspiracy to commit securities fraud and wire fraud. His sentencing is scheduled for November.

Like Mr. Nguyen, Mr. Ng was well-positioned to dole out corporate secrets, prosecutors said. As the so-called reporting manager to the Securities and Exchange Commission, he was allowed to thumb through earnings reports before their release.

“Incredibly, the person designated the ‘S.E.C. reporting manager’ for Marvell was allegedly using his special access to nonpublic information to violate the very federal securities laws he was supposed to be assuring compliance with,” Mr. Bharara said.

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DealBook: Former FrontPoint Manager Charged With Insider Trading

Federal prosecutors have filed securities fraud charges against a former hedge fund manager at FrontPoint Partners, making him the latest target in the government’s sweeping insider trading investigation.

Joseph F. Skowron, the hedge fund manager, who specialized in health care funds, also faces charges for conspiring to hide his role in an illicit trading scheme, according to a complaint filed by federal prosecutors in Manhattan. Mr. Skowron, known as Chip, surrendered to the F.B.I. on Wednesday.

The move was widely expected after Mr. Skowron’s name surfaced in a related government investigation in November. At the time, federal prosecutors charged a French doctor of illegally leaking private and material information about a clinical drug trial to Mr. Skowron, who then traded based on the leak.

The doctor, Yves M. Benhamou, pleaded guilty this week to securities fraud and conspiracy to obstruct justice, according to court documents unveiled on Wednesday. He is “cooperating in hope of receiving a reduced sentence,” prosecutors said.

Prosecutors said the scheme took place from April 2007 to late 2010 and centered around clinical drug trials for Albuferon, a drug used to treat Hepatitis C.

Dr. Benhamou, a widely known expert in Hepatitis C treatment, worked as consultant on the clinical drug trials. He also had a consulting deal at the time with an expert networking firm, which connects hedge funds with industry experts.

One of Dr. Benhamou’s clients was FrontPoint. In December 2007, Dr. Benhamou alerted Mr. Skowron to some problems with the drug trials. Shortly thereafter, Mr. Skowron, himself a medical doctor, directed a FrontPoint trader to sell part of the fund’s stake in Human Genome Sciences, which owned the drug.

The insider tidbits, prosecutors say, helped FrontPoint avoid some $30 million in losses. FrontPoint has not been accused of any wrongdoing.

Dr. Benhamou was well compensated for his role in the scheme, according to the government. Mr. Skowron and Dr. Benhamou would meet in hotels around the world. In April 2007, for instance, the pair met in a hotel suite in Barcelona to exchange 5,000 euros in cash. In April 2008, inside a hotel bar in Milan, Mr. Skowron handed Dr. Benhamou an envelope containing $10,000 in cash.

“Dr. Benhamou has acknowledged his serious mistakes in judgment and intends to live up to his obligations under his cooperation agreement,” said his lawyer, David M. Zornow of the law firm of Skadden Arps Slate Meagher Flom. “Dr Benhamou’s conduct in this instance must fairly be considered in the overall context of his extraordinary contributions to his patients and to medical science.”

Mr. Skowron, who has been on leave from FrontPoint since November, is expected in court later Wednesday. Morgan Stanley completed its spinoff of FrontPoint to the fund’s managers last month.

The United States attorney’s office in Manhattan plans to hold a news conference on Wednesday afternoon.

Complaint Against Joseph F. Skowron

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