More Charges Announced In Insider Trading Case
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There were more arrests today in the federal government's big insider trading probe. Charges were brought against four hedge fund employees. Authorities say the men got inside information from companies and then used pliers to destroy computer disks containing evidence against them.
NPR's Jim Zarroli reports.
JIM ZARROLI: U.S. officials arrested Samir Barai and Donald Longueuil and charged them with conspiracy to commit securities and wire fraud. Two other hedge fund officials, Jason Pflaum and Noah Freeman, have pleaded guilty to securities fraud and are cooperating with the government. The arrests today bring to 12 the number of people charged in connection with the investigation.
And U.S. attorney Preet Bharara said today, we are far from finished.
Mr. PREET BHARARA (Attorney): The complaint unsealed today is a sad chronicle, not only of criminal conduct, but also its brazen cover-up. It is precisely a type of pervasive and pernicious activity that causes average people to think that they would be better off pulling their money out of Wall Street and stuffing it in a mattress.
ZARROLI: U.S. officials have been investigating the use of so-called expert network firms and, in particular, a California company called Primary Global Research. These firms hire employees from major companies in order to provide better information about industry trends to their clients. But U.S. officials say in all too many cases, what they really do is pass on inside information to traders at hedge funds.
Mr. BHARARA: Given the scope of the allegations to date, we are not talking simply about the occasional corrupt individual. We are talking about something verging on a corrupt business model. For the defendants seem to have taken the concept of social networking and turned it into a criminal enterprise.
ZARROLI: At a press conference today, Bharara described the efforts by Barai and Longueuil to cover their tracks once the media began writing about the investigation. At one point Barai wrote an email to Pflaum saying they were probably safe. So what if we talked to anyone, he asked, they need proof that we asked for something. So we're OK. What Barai didn't know was that Pflaum was already cooperating with authorities.
U.S. attorney Bharara said to cover their tracks, the defendants destroyed both the hard drives of their computers and the flash drives they used to store information. Bharara said it was a scene straight out of the movies.
Mr. BHARARA: Late in the night that media reports were posted, Longueuil took two pairs of pliers, we allege, to obliterate the flash drive where he kept his inside information. It may be the first ever documented use by a portfolio manager of pliers as a tool of the trade.
ZARROLI: The arrest today also bring authorities a bit closer to the giant hedge fund company SAC, which some observers say is the ultimate target of the investigation. Both Freeman and Longueuil are former SAC employees and Freeman is the first SAC veteran to cooperate in the case. SAC issued a statement today saying it was outraged by the former employee's actions and it said it would fully cooperate with the investigation.
Jim Zarroli, NPR News.
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