Thursday, 30 June 2016
Last updated 11 hours ago
Jul 15 2011 | 12:49pm ET
Federal investigators recorded telephone calls involving 97 clients of Primary Global Research, many of them hedge fund managers and traders, as part of their investigation of insider-trading using expert networks.
The revelation appears in a Tuesday court filing by the lawyer for James Fleichman, a former sales manager at PGR set to go on trial next month. According to the lawyer, Ethan Balogh, prosecutors won approval to wiretap 104 callers to two PGR conference lines in October 2009.
Balogh revealed the scope of the wiretaps as part of his effort to get them tossed from Fleishman's conspiracy trial. According to Balogh, the taps were both overly broad—targeting at least 93 PGR clients not suspected of a crime—and unnecessary—because prosecutors had already won the cooperation of three men who could have been used to tape calls with PGR.
One of those men, Karl Motey, head of a California-based research firm, recorded a conversation with a PGR consultant prior to the authorization of the wiretaps in which the consultant "made statements reflecting that this consultant has provided and continues to provide material, non-public information relating to public companies to Artis" Capital Management, a Federal Bureau of Investigation agent said in an affidavit in support of the wiretaps.
Neither Artis nor anyone at the San Francisco-based hedge fund has been accused of wrongdoing, and its general counsel, Michael Dimitruk, said that the firm has "the highest ethical standards."
Balogh, who said prosecutors "rushed" into wiretaps, also argued that the FBI could have used former hedge fund managers Richard Choo-Beng Lee and Ali Far, who were cooperating in the Galleon Group case.
In addition, according to Balogh, there were only 15 suspects in the list of 104, including Fleishman, seven people who have pleaded guilty in the case and seven others whose names were redacted from the filing.
Fleishman will be the second person to go on trial in the Primary Global case, following the conviction last month of former consultant Winifred Jiau. That case did not rely on any wiretaps, but none of the four defendants to have faced trial in the Galleon case—all of whom were convicted—were able to convince a judge to toss the wiretaps in their cases.