U.S. arrests four in widening hedge fund probe

NEW YORK, (Reuters) – Three technology company  executives and a salesman for an “expert network” firm were  arrested and charged with leaking confidential tips to hedge  funds, including secret details about Apple Inc’s iPad ahead of  its launch.
The case is part of a widening probe of insider trading,  which intensified with a string of raids on hedge funds last  month and subpoenas for information about their activities.
The charges relate to money managers’ ties with so-called  expert networking firms, which help investors meet business  experts to research a specific industry.
“Today’s charges allege that a corrupt network of insiders  at some of the world’s leading technology companies served as  so-called ‘consultants’ who sold out their employers by  stealing and then peddling their valuable inside information,”  Manhattan U.S. Attorney Preet Bharara, whose office filed the  case, said in a statement.
The probes into corporate corruption and insider trading  will continue “over the next many months and beyond,” he said.
The defendants include an executive who worked  forFlextronics International Ltd, a contract electronics  manufacturer for Apple and other big technology companies.
Two others charged worked for chip maker Advanced Micro  Devices Inc and Taiwan Semiconductor Manufacturing Co Ltd.
All were hired consultants for California-based expert  networking firm Primary Global Research. The firm said it no  longer worked with the three consultants, and had placed the  account representative charged in the case on leave.
Authorities also announced the the guilty plea of a fifth  person, a former employee at Dell Inc, as part of the  investigation.
The hedge funds that allegedly received the inside tips  were not identified. But in the complaint, authorities said  some of the information was obtained from a hedge fund analyst  who has not been charged with any crime but admitted “to  participating in obtaining material, nonpublic information.”
The defendants were identified as Walter Shimoon, 39, of  San Diego, who worked at Flextronics; Mark Anthony Longoria,  44, employed by AMD as a supply chain manager in Round Rock  Texas; and Manosha Karunatilaka, 37, of Marlborough,  Massachusetts, who worked for Taiwan Semiconductor  Manufacturing.
The FBI arrested two of the men in California, one in Texas  and one in Massachusetts. They were expected to make initial  court appearances in those jurisdictions, law enforcement  sources said. They were charged with wire fraud and conspiracy  in U.S. District Court in Manhattan.
Daniel DeVore, formerly a global supply manager for Dell,  who worked as a consultant to the expert networking firm,  pleaded guilty to related wire fraud and conspiracy charges on  Dec. 10, authorities said.
Names of the defendants’ attorneys were not immediately  available.
Dell said it “is committed to the highest standards of  ethics and integrity” and will “cooperate fully with law  enforcement authorities.”
An Apple representative declined immediate comment. AMD,  Flextronics and Taiwan Semiconductor were not immediately  available to comment on the case.
The government said it had intercepted phone calls in which  Shimoon, a senior director of business development at  Flextronics, leaked inside information about the release of the  iPad as well as an updated version of the iPhone.
Flextronics was privy to those details in 2009 as an Apple  supplier, according to the complaint. The iPad was launched  earlier this year.
Referring to a top secret Apple project whose code name was  K48 and which eventually become the iPad tablet computer,  Shimoon is quoted in court papers as saying in an October 2009  telephone call: “At Apple you can get fired for saying K48 …  outside of a, you know, outside of a meeting that doesn’t have  K48 people in it. That’s how crazy they are about it.”
The court papers also said that Longoria, who worked for  AMD, had told several Primary Global clients what AMD’s  second-quarter 2009 revenue numbers and other financial data  would be before they were officially released.
Longoria leaked tips to a hedge fund manager who is  cooperating with the government, the court papers said. This  hedge fund manager, Richard Choo-Beng Lee, had complimented  Longoria’s work to an executive at Primary Global Research, the  complaint said.
The charges are part of a long-running insider trading  investigation that included the 2009 charges against Galleon  Group hedge fund founder Raj Rajaratnam and a score of others.  Rajaratnam is set to go on trial next year.
A personal familiar with the case told Reuters that  Karunatilaka, who had worked for Taiwan Semiconductor, had been  approached this past summer by federal agents who sought his  cooperation with the trading investigation.
The source said that Karunatilaka, while working for  Primary Global, was approached by a number of hedge funds to  provide information. The source said that one hedge fund he had  dealt with was Level Global, whose offices were raided by the  FBI in November.

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