Since the inception of Modern Trader, a core editorial theme has centered on the wisdom and power of crowds. Editorial emphasis has focused on companies and projects engaged in the collection and analysis of information.
Saturday, 10 December 2016
Last updated 6 hours ago
Jun 8 2011 | 11:36am ET
A former SAC Capital Advisors portfolio manager said he traded on inside information about 18 times as defense lawyers for Winifred Jiau, the former Primary Global Research consultant on trial for selling confidential information to hedge funds, took the offensive.
David Luttinger, a lawyer for Jiau, hammered away at Noah Freeman, asking him about his drug use, how he paid for tips and testing his memory.
Freeman, 35, told Luttinger that he regularly used marijuana from his senior year in high school until 2009. He also said that he tried hallucinogenic mushrooms for the first—and only—time that year, during a business trip.
The mushrooms landed Freeman in hospital after he was found "running around the streets of San Francisco in your underwear," as Luttinger put it. He gave the hospital a fake name.
"It was one of the worst experiences of my life," Freeman, who has pleaded guilty and is cooperating in the case, testified. "I was worried I was going to get in trouble with SAC" and lose the $1.3 million in compensation he was guaranteed.
Luttinger sought to show that drug use was not the end of Freeman's unsavory behavior, asking about his time in Taiwan.
"Was it your experience that people working in companies based in Taiwan were looser with their financial information and sales data?" he asked.
"Yes, they were," Freeman confirmed.
"Didn't you purchase a prostitute?" for one source, Luttinger continued.
"No," Freeman responded. "The conversation was conducted in Chinese. I collected a large bill and I was never sure what happened," adding that his assistant at Sonar "sorted… out" the bill of "a couple of thousand dollars."
Luttinger also asked Freeman about some cutting remarks he made about Jiau behind her back. Freeman explained that his mockery was common as employed against even his favorite co-workers.
On the stand, Freeman said he was "totally confident" that he used material, non-public information to trade "approximately a dozen times" at Sonar Capital Management, where he worked from 2005 to 2008. At SAC, "perhaps half a dozen" between 2008 and last year.
"My trading style was faster there, so I don't remember quite as well," he explained.
Luttinger pushed Freeman for precise information about his insider-trading, especially on information provided by Jiau. He was only able to find a single incident in which he said Jiau provided him with material, non-public information from a large number of messages and secretly-recorded phone calls between the two. Freeman said he could not recall the origin of some tips that Jiau may have given.
"So what we're going on here is your memory?" Luttinger asked.
Jiau faces up to 25 years in prison if convicted.