Kinnucan Indicted In Expert-Network Insider Case

Feb 22 2012 | 3:32am ET

Five days after his arrest, expert-networker John Kinnucan was formally indicted on insider-trading charges yesterday.

Kinnucan faces two counts each of conspiracy and securities fraud. The Broadband Research founder remains jailed in his hometown of Portland, Ore., pending the continuation today of the detention hearing that began yesterday. Prosecutors in New York, where the indictment was laid, told U.S. Magistrate Judge John Acosta that Kinnucan was a danger to the community and should remain in custody.

Kinnucan has not formally responded to the charges, but has consistently denied any wrongdoing.

Prosecutors say that Kinnucan obtained confidential corporate information from insiders and passed it along to his clients, among them a number of prominent hedge funds. Two of those alleged sources have already pleaded guilty to tipping Kinnucan and are cooperating with the investigation.

"John Kinnucan used financial incentives, fancy meals and other inducements to curry favor with public company insiders so they would serve up their employers’ secrets," Preet Bharara, U.S. Attorney in Manhattan, said. "He allegedly made a business model out of passing off those secrets to his hedge fund clients as legitimate research. If convicted, Kinnucan will join the scores of privileged professionals whose purported success has been unmasked as nothing more than a fraud."

Kinnucan gained some measure of fame in October 2010 when he e-mailed about 50 clients to inform them that the Federal Bureau of Investigation had approached him about cooperating and that he had refused. Among the recipients were employees of hedge funds Coatue Management, Citadel Investment Group, Maverick Capital and SAC Capital Advisors.

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