Primary Global Manager Indicted, Faces SEC Suit With Five Others

Date: Friday, February 4, 2011
Author: Bloomberg

James Fleishman, a former Primary Global Research LLC sales manager, was indicted on insider trading charges and also accused in a U.S. Securities and Exchange Commission lawsuit along with five other people of tipping investors including hedge funds.

Prosecutors in New York yesterday released an indictment charging Fleishman, 41, with one count each of conspiracy to commit securities fraud and conspiracy to commit wire fraud. Both charges carry a maximum punishment of five years in prison. Fleishman was arrested and released on $700,000 bond Dec. 16.

The charges are related to a federal investigation into hedge-fund insider trading that began with New York-based Galleon Group LLC. As part of the investigation, the SEC yesterday sued Fleishman and five others connected to Primary Global, an expert consulting firm.

“Company executives and other insiders moonlighting as consultants to hedge funds cannot blatantly peddle their company’s confidential information for personal gain,” Robert Khuzami, director of the SEC’s Division of Enforcement, said in a statement. “These PGR consultants and employees schemed to facilitate widespread and repeated insider trading by several hedge funds and other investment professionals.”

Fleishman’s co-defendants in the SEC case, Mark A. Longoria, Daniel L. DeVore, Bob Nguyen, Winifred Jiau and Walter Shimoon, were previously charged as part of a criminal investigation of insider trading involving hedge funds, banks and technology companies, as well as consulting firms such as Mountain View, California-based Primary Global. Their tips allegedly helped investors reap $6 million in illegal profits, the SEC said.

Primary Global

Primary Global connects investors with industry specialists who provide them with insight into their specific markets. Prosecutors have alleged that company insiders were paid to provide material nonpublic information to investors.

More than 30 people have been charged in overlapping conspiracies tied to the Galleon case.

The federal insider-trading probe became public in 2009 with the arrest of Galleon co-founder Raj Rajaratnam. Rajaratnam, 53, who denies wrongdoing in the case, is scheduled to go on trial Feb. 28 in Manhattan.

Longoria, 44, who worked for Advanced Micro Devices Inc., DeVore, 46, a former global supply manager for Dell Inc., Shimoon, 39, a former Flextronics International Ltd. vice president and Jiau, 43, all worked as paid consultants for Primary Global without their employers’ knowledge, the SEC said.

The regulator described Jiau as having worked for “various technology companies in Northern California.”

Inside Information

The four consultants are alleged to have passed inside information to hedge funds while working for Primary Global.

Nguyen, 32, and Fleishman were both employees of Primary Global. The SEC claims Nguyen and Fleishman helped pass information from the consultants to the hedge funds and investors that were Primary Global’s customers.

Susan Cassell, a lawyer for Nguyen, who pleaded guilty Jan. 11 to conspiracy and fraud charges, said yesterday she hadn’t seen the complaint.

“I am completely in the dark,” Cassell said.

Jonathan Marks, a lawyer for Longoria, and Johnny Sutton, who represents DeVore, declined to comment. DeVore pleaded guilty Dec. 10 to conspiracy and wire fraud charges.

Henry Mazurek, a lawyer for Shimoon, Frederick Hafetz, who represents Jiau, and Fleishman’s attorney, Benjamin Lee Coleman, didn’t immediately return phone messages seeking comment on the SEC complaint.

The case is Securities and Exchange Commission v. Longoria, U.S. District Court, Southern District of New York (Manhattan).

To contact the reporter on this story: Bob Van Voris in New York at rvanvoris@bloomberg.net; Don Jeffrey in New York at djeffrey1@bloomberg.net.

To contact the editor responsible for this story: David E. Rovella at drovella@bloomberg.net.