Monday, 27 April 2015
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Feb 9 2011 | 1:06pm ET
Cover-ups don't work very well when some of the alleged co-conspirators are working with the authorities, two hedge fund managers are learning the hard way.
Former SAC Capital Advisors fund manager Donald Longueuil went to great lengths to destroy evidence of his alleged insider-trading, and Barai Capital Management founder Samir Barai sought to orchestrate a cover-up, prosecutors said yesterday after unsealing criminal charges—including obstruction of justice charges—against the two men. Longueuil, in particular, went to great and often comical lengths to destroy evidence, according to the complaint; the only problem was that the person he was telling his profane tale of obstruction to was cooperating with the government.
That person, former SAC money manager Noah Freeman, has pleaded guilty to conspiracy and securities fraud charges and wore a wire for the government in conversations with Longueuil.
The alleged orgy of destruction began on Nov. 19 of last year, when The Wall Street Journal published the first report of the massive, three-year insider-trading probe. According to the complaint, all four men named yesterday kept "logs" of their insider information on external hard drives, until Nov. 19.
"The night that Wall Street Journal article came out… I pressed the eject button and everything's fucking gone," Longueuil allegedly told Freeman. Freeman then asked, "is the log gone," prompting Longueuil to assure, "destroyed… everything's gone."
"I, uh, chopped it up. Chopped up everything," he allegedly said. When Freeman doubted him, saying, "I don't see how you get rid of this shit," Longueuil responded, "It's easy. You take two pairs of pliers, and then you rip it open…. So I just fucking ripped it apart right there." Longueuil also allegedly said he destroyed two other hard drives containing potentially damaging evidence.
Longueuil then left his Manhattan apartment shortly before 2 a.m., according to surveillance video obtained by the Federal Bureau of Investigation.
"Put'em into four separate little baggies, and then at 2 a.m…. 2 a.m. on a Friday night, I put this stuff inside my black North Face jacket,… and leave the apartment and I go on like a 20 block walk around the city… and try to find a, a garbage truck… and threw the shit in the back of like random garbage trucks, different garbage trucks… four different garbage trucks."
Barai, too, allegedly sought to hide his alleged misdeeds, and directed his analyst, Jason Pflaum, to do the same. But, as with Longueuil and Barai, Pflaum wound up cooperating with the FBI.
Barai told Pflaum on Nov. 19 that he had read the Journal article 10 times. He then directed Pflaum, who was already cooperating, to "delete" his BlackBerry Messenger chatter. Barai's own BBM chatter allegedly included such gems as, "so what if we talked to anyone," "they need proof that we acted on something… and its hard to have that," and, "the more I think about it-just not enough clues to hold something on us."
The next morning, after Pflaum assured Barai he had done so and told him, "didn't sleep so well last night," Barai directed him to "go into the office" and "shred as much as u can." Barai also allegedly told him to "put all ur data files onto an encrypted drive" and "delete all emails from" two people. And on Nov. 21, Barai allegedly told Pflaum to drop his laptop off at Barai's apartment so that Barai could "encrypt it" and "do a dept of defense delete… so it cannot be undeleted." Barai allegedly later told Pflaum that he had done so, and Pflaum never saw the laptop again.
"When people frantically begin shredding sensitive documents and deleting computer files and smashing flash drives and chasing garbage trucks at 2 a.m…. it is not because they have been operating legitimately," U.S. Attorney Preet Bharara said at yesterday's press conference.
But the four didn't just talk about covering up their alleged crimes. In at least one case, the FBI recorded a conversation between Freeman and Longueuil in which the latter appears to admit he traded on insider information.
Discussing Winifred Jiau, a consultant for expert-network firm Primary Global Research who allegedly passed confidential information about Marvell Technology Group's financials, Pflaum asked, "Did you trade on the Wini P&L? We both did, didn't we?"
"Yeah," Longueuil allegedly responded.
"For all their presumed sophistication, the defendants lacked a mobster's instinct for conversational discretion," Janice Fedarcyk, assistant director-in-charge of the FBI, said.
Mar 20 2015 | 12:45pm ET
StreetWise Partners, a non-profit organization that works with low-income individuals to help them overcome employment barriers, raised over $275,000 at the 2015 Raising the Ante Charity Poker Tournament and Casino Event last Wednesday evening at Capitale. Here are some photos from the event. Read more…