Witness In Jiau Trial Says He Destroyed Evidence

Jun 15 2011 | 2:32am ET

A former hedge fund analyst said that he deleted information received from alleged tipsters, but not information received from Winifred Jiau, the former expert network consultant on trial for insider-trading.

Under cross examination yesterday, Jason Pflaum, formerly of Barai Capital Management, testified that he deleted a number of files after the arrest of Galleon Group founder Raj Rajaratnam on inside-trading charges. After Galleon, he said, "there was more sensitivity to over-the-line business. More of a concern internally of who we could be talking to that was over the line."

But Pflaum said he did not delete files related to Jiau, who is accused of selling information about two technology companies to Barai and another hedge fund.

Joanna Hendon, Jiau's lawyer, asked if Pflaum's boss, Samir Barai, was concerned in the wake of Rajaratnam's arrest. Pflaum said, "I don't think there was any major concern."

"The gist of the conversation was, 'let's clean up some of our contacts that are questionable.'" he explained.

"They just wanted to make sure I got rid of them."

Barai pleaded guilty to insider-trading charges last month.

Earlier yesterday, prosecutors asked Pflaum to rank his inside tipsters—the cooperating witness previously testified that he received information from more than 10 people.

"There is no comparison," Pflaum said. Jiau's "information was spot-on."

"It was incredibly specific, while 10-K's never touched it," he said of Jiau's information, referring to another tipster. "She had operating margins, earnings per share, metrics that were never found in 10-K's data."

"On a relative basis, Winnie was at the top."

During her cross examination, Hendon asked Pflaum if his decision to turn state's evidence and wear a wire to work was "a betrayal of Mr. Barai."

"You could say that," Pflaum acknowledged. Press further, he explained, "In my view, it was starting to tell the truth, being helpful and doing the right thing."

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