How Not to Get Caught Insider Trading

Date: Thursday, February 10, 2011
Author: HFN Daily

First, don't buy a million dollar apartment in a building with good surveillance systems.

Former SAC Capital Advisor Donald Longueuil must be regretting the choice to purchase a two-bed, two-bath condominium in the Lenox Hill neighborhood of Manhattan for almost $1.73 million in 2008, according to public records.

Longueuil got the apartment at quite a discount as it was originally listed at $1.9 million, according to the real estate Web site Street Easy. But he also probably never imagined that the high-rise tower, built in 2003, would have such good security systems that the government could use them in their insider trading case against him.

One of the counts against Longueuil was for destruction of evidence. When the Wall Street Journal reported in November, that federal prosecutors were preparing charges against hedge fund managers who dealt with expert network firms, Longueuil met with another ex-SAC manager, Noah Freeman, to describe his reactions to The Journal's revelations.

Unfortunately, for Longueuil, Freeman was already cooperating with the FBI and taping the conversation.

Longueuil was recorded by Freeman describing his efforts to get rid of a computer log which prosecutors allege kept track of Longueuil's use of inside information in his trading.

Those efforts included chopping up a computer USB drive, putting the pieces into four baggies, and stuffing the baggies into his black North Face jacket. Then at about 2 a.m. on Nov. 20, Longueuil went for a long walk, depositing the baggies into the back of four different garbage trucks, according to the criminal complaint.

When Freeman expressed amazement at how he was able to chop up the drive, Longueuil said, "Oh, it's easy. You take two pairs of pliers, and then you rip it open . . . and then it's just a piece of NAND [a type of flash memory storage]."

Longueuil could claim that this was all a bunch of trader bravado, but there were those pesky surveillance cameras.

Surveillance video showed Longueuil leaving the building at about 2 a.m. with another person and then returning about half an hour later, prosecutors alleged.

Longueuil was arrested Tuesday and released on $1.5 million bond. His defense attorney did not return immediately return a telephone message.

SAC has said that it was outraged by Longueuil's and Freeman's conduct which violated its policies and that the firm continues to cooperate with the government's investigation.