March 21, 2023

Former F.B.I. Agent to Plead Guilty in Press Leak

Federal investigators said they were able to identify the man, Donald Sachtleben, a former bomb technician, as a suspect in the leak case only after secretly obtaining A.P. reporters’ phone logs, a move that set off an uproar among journalists and members of Congress of both parties when it was disclosed in May.

Mr. Sachtleben, 55, of Carmel, Ind., who was an F.B.I. agent from 1983 until 2008 and was later hired as a contractor, has agreed to serve 43 months in prison for the leak, the Justice Department said. His case is the eighth leak-related prosecution under the Obama administration. Only three such cases were prosecuted under all previous presidents.

“This prosecution demonstrates our deep resolve to hold accountable anyone who would violate their solemn duty to protect our nation’s secrets, and to prevent future, potentially devastating leaks by those who would wantonly ignore their obligations to safeguard classified information,” said Ronald C. Machen Jr., the United States attorney for the District of Columbia.

Mr. Sachtleben has separately agreed to plead guilty and serve 97 months in the pornography case. His total sentence, should a judge accept the plea deal, is 140 months, or nearly 12 years. The 43-month sentence for leak-related offenses is the longest ever imposed by a federal civilian court in such a case, although a military judge last month sentenced Chelsea Manning, formerly known as Pfc. Bradley Manning, to 35 years in prison for leaking archives of documents to WikiLeaks.

Paul Colford, a spokesman for The A.P., would not discuss the case, saying, “We would never comment on our sources.”

The case originated in a successful intelligence operation in April 2012 that disrupted a plot by Al Qaeda in the Arabian Peninsula, a Yemen-based offshoot of the main group, to destroy an airliner. The government was able to obtain a special underwear bomb apparently designed by the terrorist group’s master bomb maker, Ibrahim al-Asiri, to evade detection in airport security checks.

On May 7, 2012, The A.P. broke the news that the bomb plot had been disrupted, setting off further disclosures.

That evening, Richard A. Clarke, a former Clinton administration national security official who had been briefed on the case by John O. Brennan, then the top White House counterterrorism official and now the C.I.A. director, said the plot never came close to being carried out because it was under “insider control” by intelligence officials.

Soon, The Los Angeles Times, The New York Times and other news organizations reported that the would-be suicide bomber in the operation had been a double agent.

The disclosure about the Yemen bomb plot came as Republicans were accusing the White House of deliberately leaking a variety of secret information to make President Obama look tough on national security issues in an election year, an allegation that the White House denied. Amid Republican calls for independent prosecutors, Attorney General Eric H. Holder Jr. assigned Mr. Machen to handle the Yemen bomb plot case.

Nearly a year later, in May 2013, the Justice Department disclosed that after the F.B.I. had interviewed more than 550 officials and been unable to solve the case, investigators secretly used subpoenas to telephone companies to obtain calling records for 20 lines associated with A.P. bureaus and reporters. The scope and secrecy of the subpoenas outraged journalism organizations and lawmakers of both parties, who accused the department of going too far.

The Justice Department said the phone records had proved crucial in identifying Mr. Sachtleben as a suspect. In a bizarre coincidence, investigators then discovered that other law enforcement officials had already seized his computer and other electronic materials in an unrelated child pornography investigation.

“Sachtleben was identified as a suspect in the case of this unauthorized disclosure only after toll records for phone numbers related to the reporter were obtained through a subpoena and compared to other evidence collected during the leak investigation,” the Justice Department said. “This allowed investigators to obtain a search warrant authorizing a more exhaustive search of Sachtleben’s cellphone, computer and other electronic media, which were in the possession of federal investigators due to the child pornography investigation.”

A court filing said agents discovered evidence that he had stored classified intelligence information on the computer without authorization, leading to a separate charge under the Espionage Act.

During his 25-year career with the F.B.I., Mr. Sachtleben worked on many major terrorism cases, a court filing said, including the 1993 World Trade Center bombing, the 1995 Oklahoma City bombing, the 1998 American Embassy bombings in Africa, the 2000 bombing of the American destroyer Cole in Yemen, and the terrorist attacks of Sept. 11, 2001.

He held a top secret clearance and, among other assignments, he worked for the explosives unit at the F.B.I. laboratory in Quantico, Va. The court filing said that he met one of the A.P. reporters, identified only as Reporter A, in 2009, and that in the following years he helped the journalist with information about bomb-related issues.

One court filing quoted text messages in which the reporter reached out to Mr. Sachtleben on April 30, 2012, after ABC News reported that Mr. Asiri might have been working on bombs that could be surgically implanted. Mr. Sachtleben and the reporter exchanged several text messages, quoted in the court filing, speculating about the ABC report. As it turns out, the contractor was about to take a trip to Quantico. On May 2, he visited the lab where the underwear device was being examined, it said, and soon called the reporter.

Two and a half hours later, the court filing said, two A.P. reporters began calling government officials saying they knew that the United States government had intercepted a bomb from Yemen and that the F.B.I. was analyzing it.

The next day, May 3, 2012, law enforcement agents in Indiana, working on an unrelated case involving the distribution of child pornography on the Internet, obtained a search warrant for Mr. Sachtleben’s house, court filings show. They seized his computers on May 11.

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Bucks Blog: Be Wary of Debt Settlement Calls

It may sound like a solution: You are mired in debt and a telemarketer calls, offering to help reduce the amount you owe, in exchange for a fee.

But consumers should be very wary of such calls, said Claire Rosenzweig, president and chief executive of the Better Business Bureau of Metropolitan New York. “If someone just willy-nilly calls you and says they can reduce your debt, just don’t do it,” she said. The better choice is to hang up and do your own research about the legitimate resources that are available to help you, she said. Then, you can initiate your own call, once you are comfortable with an agency’s credentials.

Debt settlement firms typically offer to negotiate with creditors in exchange for a fee. But you can often do that yourself at no cost, she said, and in most cases, it makes sense to use the money you would pay to the settlement firm to pay down your debt directly.

Most settlement firms charge a fee, and some hold your money while they negotiate with creditors. But consumers’ credit ratings may suffer in the interim, and they may ultimately may wind up further in debt if the firm doesn’t follow through. In the worst case scenario, firms may take your money and do nothing.

That’s what is alleged to have occurred, in a case announced by the federal government on Tuesday. The government charged a debt settlement company with defrauding more than 1,200 people who were struggling with credit card debt.

The office of Preet Bharara, the United States attorney for the Southern District of New York, announced the unsealing of an indictment against Mission Settlement Agency, its manager and three employees. Officials said the firm, operating for several years in Manhattan and Brooklyn, systematically defrauded consumers across the nation. A message left at the agency’s phone number wasn’t immediately returned.

The action was the first criminal referral from the federal Consumer Financial Protection Bureau. “These wolves in sheep’s clothing take money from consumers who are already struggling to pay their bills, falsely promising them help while really making their problems worse,” the bureau’s director, Richard Cordray, said in prepared remarks.

According to the indictment, the firm contacted consumers by phone as well as by mail and promised to reduce their debts, typically by 45 percent. The firm took thousands of dollars in fees from customers, telling them it had to set aside money in escrow while it negotiated with creditors. But in the majority of cases, the firm did little or no work and “failed to achieve any debt reduction whatsoever.”

“Preying upon the financial desperation of individuals struggling to pay their credit card debts,” the indictment said, “the defendants falsely and fraudulently tricked over a thousand such individuals into becoming Mission’s customer with significant — but false — assurances about Mission’s ability to help.”

Ms. Rosenzweig of the Better Business Bureau said debt settlement firms know consumers are vulnerable to hearing what they want to hear.  But if you want help negotiating your credit card debt, the Justice Department accredits certain organizations to provide debt counseling and maintains a list on its Web site. Most accredited agencies offer their services for a low fee, or sometimes free — but you should ask up front.

Additional information about other options for managing your debt — like help if you are in trouble with your mortgage — is available from the Better Business Bureau and from the Federal Trade Commission.

Have you ever used a debt settlement firm? What happened?

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Disruptions: Disruptions: A Fuzzy and Shifting Line Between Hacker and Criminal

The federal government described Daniel Spitler, left, and Aaron Swartz as hackers.left: Bill Kostroun/Associated Press; Noah Berger/Reuters The federal government described Daniel Spitler, left, and Aaron Swartz as hackers.

In January 2011, I was assigned to cover a hearing in Newark, where Daniel Spitler, then 26, stood accused of breaching ATT’s servers and stealing 114,000 e-mail addresses.

Mr. Spitler stood nervously next to armed United States marshals while listening to the judge and prosecutors. I couldn’t help thinking that I could have been the one in front of that judge, labeled a hacker by the Justice Department.

Am I a hacker? No. Not even close. Yet years ago, when I first started learning how to write software code, I dabbled in things that could have been labeled as such by our outdated justice system: downloading free online scripts that could trace people’s whereabouts or scraping Web sites in search of music that didn’t belong to me.

A hacker can be a vandal who renders a Web site inoperable or a thief who profits from stolen passwords and credit card numbers. Mr. Spitler was neither kind. But he was being paraded in front of the world, charged with fraud and conspiracy, and likened, by Paul J. Fishman, the United States attorney for New Jersey, to hackers from LulzSec and Anonymous.

Mr. Spitler told prosecutors that he had tried to notify ATT about the security hole on its site, but after the company did not respond, the e-mail addresses were given to Gawker and other media outlets. He said he did not sell them, or post them online.

“Forty years ago, a hacker was someone who took great joy in knowing everything about computers,” said Susan P. Crawford, a professor at the Benjamin N. Cardozo School of Law at Yeshiva University. “The word was really used in admiration. Now it is used to describe and condemn both professional cyberattackers and amateurs who are swept together within the broad description of the word.”

The same label of hacker was also applied by the Justice Department to Aaron Swartz. Mr. Swartz, a 26-year-old entrepreneur and activist, was set to be charged with wire fraud and computer fraud after he downloaded 4.8 million articles and documents from Jstor, a subscription-only service for distributing scientific and literary journals, because he felt that information should be available to everyone at no cost.

Mr. Swartz could have faced up to 35 years in prison and $1 million in fines, but before the case went to trial, he hanged himself in his Brooklyn apartment. His family issued a statement saying that his death “is the product of a criminal justice system rife with intimidation and prosecutorial overreach.” The United States attorney who was overseeing the case, Carmen Ortiz, said her office’s “conduct was appropriate in bringing and handling this case.”

Both cases are perfect examples of the justice system’s misunderstanding of what a hacker actually is. To many people who understand computers and the law, there is a danger in lumping people who have not sought financial gain with armed robbers. Where people should receive slaps on the wrist, they face decades in prison.

“There’s still uncertainty as to what should be criminal online, and the statutes are pretty vague,” said Orin S. Kerr, a professor of law at George Washington University. “It’s hard because you’ve got conduct that looks bad, and maybe leads to some harm, coupled with vague laws that haven’t properly been clarified by Congress.”

The lack of clarity is something that became all too apparent in Mr. Spitler’s case. When asked by prosecutors why he had hacked the servers, he said he didn’t think he was doing anything illegal. When asked why, he replied, “ ’cause I didn’t hack anything.”

A version of this article appeared in print on 01/28/2013, on page B4 of the NewYork edition with the headline: A Fuzzy Line Separates Hacker and Criminal.

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DealBook: Gupta Won’t Testify at His Insider Trading Trial

Rajat Gupta, a former Goldman Sachs director, arriving at court last week.Peter Foley/Bloomberg NewsRajat Gupta, a former Goldman Sachs director, arriving at court last week.

Rajat K. Gupta, a former director of Goldman Sachs accused of leaking secrets about the bank, will not testify at his insider trading trial, according to a letter from his lawyers that was filed with the court on Sunday.

His lawyers’ decision is something of an about-face. Late Friday, after the jury had gone home for the weekend, Gary P. Naftalis, a lawyer for Mr. Gupta, said it was said that it was “highly likely” that his client would testify in his own defense next week.

On Sunday, Mr. Naftalis said he had reversed course.

“We have the spent the last day reviewing what we believe we need to present in the defense case,” Mr. Naftalis wrote in his letter. “After substantial reflection and consideration, we have determined that Mr. Gupta will not be a witness on his own behalf in the defense case.”

A spokesman for the United States attorney’s office in Manhattan declined to comment. Mr. Naftalis declined to comment beyond what was written in the letter.

The government has accused Mr. Gupta, who was also a former head of the consulting firm McKinsey Company, with leaking boardroom secrets about Goldman Sachs and Procter Gamble to his friend and business associate Raj Rajaratnam. Last year, a jury convicted Mr. Rajaratnam, the former head of the Galleon Group hedge fund, with insider trading.

The trial, in Federal District Court in Manhattan before Judge Jed S. Rakoff, will begin on Monday its fourth and final week.

On Friday, Mr. Naftalis had promised Judge Rakoff that if the defense decided that Mr. Gupta was not going take the stand, he would immediately inform the prosecutors so “they could put down their pencils” in preparing to cross examine him.

There were signficant risks — but also potential rewards — in having Mr. Gupta testify.

Once a defendant testifies in his own case, the jury’s focus often shifts from the government evidence to the credibility of Mr. Gupta, who, until recently, had a sterling reputation and a stellar business career. That could have worked in his favor if he would have been able to explain away the substantial circumstantial evidence against him.

But it could have also backfired if something went wrong on the witness stand and Mr. Gupta said something incriminating.

On Friday, the government rested its case after 12 days of testimony from 20 witnesses. The defense began putting on its own witnesses and will continue its case on Monday. Without Mr. Gupta’s testimony, closing statements could begin as soon as Tuesday, with the jury getting the case by mid-week.

Letter From Rajat Gupta’s Lawyer

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Swiss Bankers Charged With Helping U.S. Taxpayers Hide Assets

The office of the Manhattan United States attorney said in a statement that the indictment accused the bankers of trying to “capture business lost by UBS A.G. and another large international Swiss bank in the wake of widespread news reports that the Internal Revenue Service was investigating UBS” in 2008 and 2009.

Neither the international Swiss bank nor the other purported co-conspirators were identified by prosecutors.

The three bankers worked as client advisers at a Zurich bank branch and hid certain Swiss bank accounts and the income they had generated, prosecutors said. They did not identify the bank branch.

The indictment filed in United States District Court in New York identified the three bankers as Michael Berlinka, Urs Frei and Roger Keller. It said they all lived in Switzerland. Their lawyers were not immediately known.

If convicted, the bankers face a maximum prison term of five years under the conspiracy charge.

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DealBook: Manager Who Claimed to Own Facebook Shares Charged With Fraud

John A. Mattera was arrested in Florida on Thursday.Palm Beach County JailJohn A. Mattera was arrested in Florida on Thursday.

It may be the new, new thing in fraud.

John A. Mattera, 50, a Florida-based investment manager, was arrested Thursday on charges of running an $11 million, two-year fraud that falsely promised investors access to coveted shares of Groupon, Facebook and other private companies.

Mr. Mattera, the head of the Praetorian Global Fund, claimed to own more than a million shares each of Facebook and Groupon, according to a complaint filed in Federal District Court in Manhattan. He represented to investors that those holdings, bought on the private markets, would surge in value after the companies went public, the complaint said. Prosecutors allege the fund didn’t have such investments.

Instead, Mr. Mattera used millions of dollars of investor money to finance his lavish lifestyle, the complaint alleges. Among Mr. Mattera’s expenses: more than $245,000 for home furnishings and interior design services, more than $11,000 for tailored clothing and more than $17,000 for “boat-related expenses.”

Prosecutors have charged Mr. Mattera with one count of conspiracy to commit securities fraud and wire fraud, one count of securities fraud, one count of wire fraud and one count of money laundering. The Securities and Exchange Commission is also taking civil action against Mr. Mattera.

“As alleged, John Mattera duped investors into believing they had bought rights to shares of coveted stock in Facebook and other highly visible and attractive companies which had not yet gone public,” Preet S. Bharara, the United States attorney in Manhattan, said in a statement. “With today’s charges, his charade is exposed and he will be held to account for his alleged crimes.”

Carl F. Schoeppl, Mr. Mattera’s lawyer in the criminal case, declined to comment.

The charges against Mr. Mattera come as investors clamor for shares of newly public Internet companies, a frenzy that echoes the early days of the last dot-com boom in the 1990s. Getting into a company early can be lucrative. Groupon, the daily deals site, jumped more than 30 percent on its first day of trading.

To attract clients, Mr. Mattera allegedly enlisted the help of Joseph Almazon, an unregistered broker with Spartan Capital Partners on Long Island, who solicited investments for Mr. Mattera’s Praetorian funds using LinkedIn advertisements that offered customers “the opportunity to buy pre-I.P.O. shares” in Facebook, Groupon, Twitter, Zynga and other companies. Mr. Almazon promised that “unlike most of the other investment banking firms, we let you sell your shares right at the open” — referring to the first day the company goes public, according to the civil action.

After investors signed up, their money was transferred to an escrow service headed by John R. Arnold. Mr. Arnold, in turn, passed the money along to himself and to Mr. Mattera, as well as to accounts registered to Mr. Mattera’s mother and wife, the complaint said.

Mr. Mattera is no stranger to the law. In 2009, he was accused by the Securities and Exchange Commission of evading registration requirements by backdating certain promissory notes. He paid a penalty of $140,000 and was barred from trading penny stocks, shares of smaller public companies that are worth less than $1 apiece.

Three of the current criminal charges against Mr. Mattera, who was arrested at his home in Fort Lauderdale, Fla., on Thursday, carry a maximum sentence of 20 years in prison each. He faces a maximum sentence of five years on the conspiracy charge.

Mr. Mattera and his associates “exploited investors’ desire to get an inside track on a wave of hyped future I.P.O.s,” George S. Canellos, the S.E.C.’s New York regional director, said in a statement. “Even as investors believed their funds were sitting safely in escrow accounts, Mattera plundered those accounts to bankroll a lifestyle of private jets, luxury cars, and fine art.”

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Full Tilt Poker Site Misused Players Money, U.S. Says

That is the essence of a civil complaint that federal prosecutors filed on Tuesday. It asserts that players around the world entrusted Full Tilt with $390 million in gambling money, and that the company promised to keep those funds in secure accounts. In reality, prosecutors found, the money wasn’t there; instead, much of it had been transferred to the owners and management of Full Tilt, some of whom were themselves among the most prominent and popular poker players in the world.

“Full Tilt was not a legitimate poker company but a global Ponzi scheme,” said Preet S. Bharara, the United States attorney for the Southern District of New York in Manhattan, whose office filed the complaint.

Barry Boss, a lawyer for Full Tilt, which had its headquarters in Ireland, was on a flight and unavailable to comment, a person at his office said.

Prosecutors said they exposed the scheme this spring while investigating other problems at Full Tilt Poker and two other poker sites, Poker Stars and Absolute Poker, all of which were based outside the United States. In April, the government shut down access to the sites for American players, arguing that they were violating fraud and money-laundering laws.

Before that, American players had wagered hundreds of millions of dollars on the sites. From their home computers, players would put money into accounts with the virtual poker clubs and then bet against one another.

Full Tilt, like the others, told players that it kept their money — including their winnings — in accounts that they could tap into or close out at any time. And the company had a reputation for paying back players in a timely fashion.

When the sites were shut down, prosecutors worked out agreements with them to help them repay players what they were owed.

But reimbursements to Full Tilt players slowed or stopped altogether. The money available turned out to be insufficient, according to prosecutors, because the owners and board members of Full Tilt had themselves tapped those accounts for $440 million since April 2007.

The management’s luck, it would seem, ran out.

Among those profiting, the complaint claims, were some of the biggest names in poker: Howard Lederer, nicknamed the Professor, is said to have received payouts of $42 million. Chris Ferguson, nicknamed Jesus in the poker-playing community for his long hair, received at least $25 million and was “owed” $60 million more, prosecutors said. The two men could not be reached for comment.

Greg Brooks, an accomplished poker player who was once a regular player at Full Tilt, said the federal complaint was a painful eye-opener about what was happening behind the scenes at Full Tilt. In the past, he said, he regularly received sums in excess of $100,000 from Full Tilt, paid within a week of his request, suggesting that he could get access to his money whenever he wanted.

“My impression was that things were working well for years. I had no inkling, not even the slightest guess it wasn’t like that,” he said.

Mr. Brooks, who lives in New York, said he was owed a sum in the “low- to mid-six figures” by Full Tilt that he doubts that he will get back. (He said he was reimbursed a substantial but lesser amount by Poker Stars.) And he added that he was particularly upset with some of the fixtures in the poker community who, he said, paraded around as “brand ambassadors” for Full Tilt. Their behavior, he said, represented a major breach of trust and honor among poker players. “There’s an inherent level of trust and handshaking in the poker community that is unique to it,” he said.

In its complaint, which is meant to amend the original criminal complaint unsealed in April, the government asks that the members of Full Tilt management forfeit illicitly gained funds. Under federal rules, Full Tilt players could have the opportunity to petition for their money once the lawsuit is resolved.

Some advocates for legalizing online poker pointed to the complaint as another reason that the activity should be licensed and regulated by the United States government.

“This is a system that has been forced into place by the failure of the U.S. to regulate online gambling,” said Lawrence Walters, a Florida lawyer who specializes in gambling and First Amendment law, arguing that players were forced to send their money into risky overseas accounts. “The prohibitionists have gotten their way so far.”

He also quibbled with the government’s characterization of Full Tilt as a Ponzi scheme. He said that the government was using a “focus-group” tested term to get attention, when the allegations suggest that the management of Full Tilt may simply have been lying to players and possibly embezzling funds.

He also said he didn’t think that what prosecutors said happened at Full Tilt was happening in the rest of the industry.

“This is not endemic to the industry,” Mr. Walters said. “Sites live and die on their reputation. To the extent sites get a reputation for slow pay or no pay, that will quickly circulate.”

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DealBook: Expert Network Consultant Is Convicted in Insider Trading Case

8:37 p.m. | Updated
During the insider trading trial of the expert network consultant Winifred Jiau, the government’s central witness referred to her as “the Poohster.” And as is the case in the adventures of Winnie the Pooh, it was a sweet tooth that brought her down.

On Monday, Ms. Jiau was convicted of selling technology company secrets to hedge fund traders for hundreds of thousand of dollars, payoffs she referred to in code as “sugar.” Though most knew the technology consultant as Winnie, some of her hedge fund clients called her the Poohster, after the bear always in search of a pot of honey.

Ms. Jiau, 43, was charged, tried and convicted in less than eight months, and now faces up to 25 years in prison when she is sentenced on Sept. 21.

Her lawyer said Ms. Jiau would appeal the verdict, which jurors at the United States District Court in Manhattan reached after about six hours of deliberating.

Her trial was the first involving an expert network firm, a niche Wall Street business that connects investors with industry experts. Ms. Jiau worked at Primary Global Research, a company in Mountain View, Calif., that has come under heavy scrutiny. At least seven people connected to the firm have been charged with crimes related to insider trading.

“Winnie Jiau gave new meaning to the concept of social networking,” said Preet Bharara, the United States attorney for Manhattan. “She used and exploited friends at public companies for the purpose of obtaining, and then selling, inside information. With today’s conviction, another link in a corrupt network has been broken.”

The jury foreman, Susan Kohlmeyer, an educator from Westchester County in New York, expressed dismay about corruption in the world of finance.

“I was despairing when I heard from those witnesses about what goes on in the system,” she told reporters outside the courthouse, according to news wire reports. “I hope that hedge funds will be re-examined, because there’s a lot of corruption.”

Ms. Jiau was one of just five insider trading defendants to fight the government’s charges this year. All have been found guilty.

In the trial of Ms. Jiau, the central witness for the government was Noah Freeman, a former hedge fund portfolio manager at SAC Capital Advisors, who testified that he had received illegal stock tips from her.

At trial, Mr. Freeman said tips from Ms. Jiau were “absolutely perfect” but bemoaned her often rude behavior. She could be difficult to contact and was often unreasonable about wanting to be showered with gifts, he testified.

Mr. Freeman said that in addition to being paid $120,000 a year by him and his co-conspirators, she expected the men to send her presents, including gift certificates to the Cheesecake Factory and three iPhones. Perhaps most frustrating, he said, were the lobsters.

Ms. Jiau on more than one occasion requested lobsters be delivered to her in California, including for Thanksgiving in 2007. Those lobsters, however, died at FedEx after Ms. Jiau failed to collect them in time.

A native of Taiwan, Ms. Jiau settled in California after earning a master’s degree in statistics from Stanford University. Her lawyer, Joanna C. Hendon, told jurors that while the information that Ms. Jiau obtained about companies may have been nonpublic, it was not material.

She said a significant portion of evidence against her client was the result of a simple twist of fate. One of the hedge fund managers implicated in the scheme, Samir Barai, has hearing problems and often recorded calls with Ms. Jiau so he could listen to them afterward. Three of those conversations were played at trial. Mr. Barai pleaded guilty and agreed to cooperate.

In instant messages and e-mails with Mr. Barai, Ms. Jiau referred to her tips as “recipes,” her tipsters as “cooks” and the money for her information as “sugar.” At times, Ms. Jiau could be tough.

In June 2008, during the final year of what prosecutors say was Ms. Jiau’s foray into insider trading, she sent a note to Mr. Barai letting him know where things stood — and that she wasn’t the only one who craved sweets.

“Cooks are on strike now,” she wrote to Mr. Barai in an e-mail.

“So drop some of your extra sugar to me,” she continued. “Cooks don’t talk to me without sugar.”

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Drug Makers’ Feared Enemy Switches Sides, as Their Lawyer

He racked up numerous convictions and mega-settlements in nearly a quarter-century, using whistle-blowers and secret grand juries to pressure major pharmaceutical and health companies into ending illegal practices like kickbacks to doctors and misuse of blockbuster drugs.

Once described as a cross between a firebrand preacher and a charismatic litigator, Mr. Loucks burnished a reputation aptly captured in a Fortune magazine headline: “Why Do Drug Companies Fear This Man? Maybe because he’s declared all-out war on cheats in the drug industry.”

But a year and a half ago, Mr. Loucks, a Republican, left the United States attorney’s office in Boston after he was passed over for the top post and President Obama appointed a Democrat. Instead, Mr. Loucks joined Skadden, Arps last July, and has startled former allies by emerging in recent months as zealous a corporate defender as he was a prosecutor, complete with proposals seeking more lenient treatment for the medical companies he once vilified.

In a six-page memo last month to clients in his portfolio, which may include some of the very same corporations he prosecuted repeatedly, Mr. Loucks bemoaned strategies he had embraced.

“The government and the whistle-blower have an advantage,” he wrote, complaining that federal investigators were now using the law unfairly. “While prosecutors often assert the company has engaged in ‘serious’ misconduct, they keep the company in the dark, often for years, as to the specific allegations.”

Those who have known him are quick to recall that his crowning achievement was a $2.3 billion settlement against Pfizer that capped a four-year secret investigation.

“We’re all disappointed that he’s gone over to the dark side because it seemed that he was a good prosecutor,” said Shelley R. Slade, a whistle-blowers’ lawyer in Washington and a former senior counsel for health care fraud at the Justice Department.

“I looked upon it with sadness,” Patrick Burns, spokesman for the whistle-blower advocacy group Taxpayers Against Fraud, said of Mr. Loucks’ change. “He’s a good and honorable person. He did great work in the Boston office. He’s a good lawyer. It’s just too bad.”

Federal ethics rules prohibited Mr. Loucks from any dealings with the United States attorney’s office in Boston for a year after his resignation, and he can never be involved in cases he investigated directly. But he is not barred from representing clients he once prosecuted on other matters, and his law firm’s roster includes some of the biggest companies he once investigated, including Pfizer, Merck, Schering-Plough, Bristol-Myers Squibb and Medtronic.

He defends his newfound friendship with former foes, and notes that he’s still wearing cowboy boots native to his Oklahoma childhood even though he’s now working in the white-collar division of a prestigious law firm.

“While everyone calls it ‘the other side,’ I’m doing the same thing I’ve always done, which is zealously representing my clients,” he said.

And while he used to call some of those people’s actions “evil,” today he argues that drug and medical device companies are making strides in complying with federal billing, fraud and kickback laws. “They make products that have huge benefits to a number of people,” he said. Skadden, a 2,000-lawyer firm, has made several hires in recent years to amplify its health care practice.

In interviews and a lengthy e-mail exchange, Mr. Loucks said his views on the whistle-blower law had evolved.

The False Claims Act, with its triple damages, has been the government’s most powerful weapon against health care fraud since Congress in 1986 increased the rewards for whistle-blowers. Since then, taxpayers have recovered an estimated $28 billion from medical companies.

As a federal prosecutor in Boston, Mr. Loucks created a health care fraud unit and used the law, as well as the tools of secrecy and surprise, to reap major awards. The unit’s victories are renowned, starting with an $875 million payment in 2001 by TAP Pharmaceuticals. Whistle-blowers shared $95 million in that case, alerting companies and informants to the stakes involved.

For years, Mr. Loucks has argued that whistle-blowers are paid far much in health care fraud cases — bounties up to 30 percent, totaling $650 million in just the last two years, he said. These people would blow the whistle for less, he argued both inside the prosecutor’s office and more recently in a paper titled “the Great American Giveaway.” While that hostility toward what he considers the greed of some whistle-blowers is old news, Mr. Loucks’ views on unsealing their complaints are new.

In his May 12 memo to clients, Mr. Loucks urged some companies to press judges to unseal complaints more quickly. That way, he says, they can learn the scope of complaints sooner, identify witnesses and fight back harder.

“If Mike was still with the Justice Department, he could give you 10 reasons why this is a bad idea,” said Suzanne E. Durrell, a whistle-blowers’ lawyer in Boston who worked with Mr. Loucks when she was chief of the civil division for the United States attorney in Massachusetts.

Mr. Loucks says more openness would let companies clean up their own acts, even if it meant adverse publicity.

He points to new statistics that he says support his argument. The Justice Department reported to Congress that 885 False Claims Act cases involving health care fraud were pending under seal at the beginning of this year, with only about 200 prosecutors to juggle them. On average, a case was sealed for more than a year, and some much longer.

“That the government doesn’t have adequate resources to handle the cases is not a good cause to keep them under seal,” Mr. Loucks said in an interview, comparing it to a sports game where only one team is allowed to try to score. In these cases, that would now be his former team.

“I knew what I was doing on behalf of the government,” he said. “I don’t know if lawyers on the other side felt they were not able to adequately represent their clients while the case was under seal.”

Nicholas C. Theodorou, chairman of Foley Hoag’s business crimes defense group in Boston, said Mr. Loucks’ argument made sense from a corporate defense standpoint, and possibly would sit well with some federal judges who have questioned why cases remain under seal so long.

For his part, Mr. Loucks uses a baseball reference. Johnny Damon left his beloved Boston Red Sox in late 2005 to sign with “the evil empire, the New York Yankees,” Mr. Loucks said. Both teams won World Series with help from Mr. Damon.

Asked whether the “evil empire” analogy fit the Justice Department or Skadden, Mr. Loucks said, “One man’s evil empire is another’s home team.”

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