Don Ching Trang Chu, the “expert- network” executive arrested yesterday on insider-trading charges, had a roster of Asia-based employees of North American technology companies to feed information to clients, according to court documents.
Chu, who worked for Primary Global Research LLC of Mountain View, California, offered to set up hedge-fund manager Richard Choo-Beng Lee with employees of Sierra Wireless, Broadcom Corp and Atheros Communications when he planned to travel to Taiwan in 2009, US prosecutors said in a criminal complaint yesterday in Manhattan. Lee, co-founder of Spherix Capital LLC, was secretly cooperating with the government after being ensnared in the Galleon Group insider-trading probe.
Primary Global billed Chu on its website as the firm’s “bridge to Asia experts and data sources.” In e-mails and recorded conversations, Chu, 56, said he liked arranging investor meetings in Asia because regulators weren’t too aggressive.
The US Securities and Exchange Commission is “too strong,” Chu told Lee in a conversation recorded by the Federal Bureau of Investigation in August 2009, according to the complaint. “In Asia, there, nobody cares.”
Primary Global is one of about 40 firms that connect investors with research and experts in a range of sectors, countries and thousands of individual companies. The detailed information they provide on product development, sales and company strategy complements, and sometimes supplant, conventional research provided by Wall Street firms.
Securities fraud
Insider trading involves the illegal buying or selling of stock using material, nonpublic information. Last year, Lee pleaded guilty to insider trading at San Jose, California-based Spherix Capital, one of 14 guilty pleas in the Galleon case. Raj Rajaratnam, founder of New York-based Galleon, and former hedge- fund consultant Danielle Chiesi yesterday lost a bid to bar wiretap evidence against them. They deny wrongdoing.
“There is probable cause to believe that Chu promotes the firm’s consultation services by arranging for firm consultants to provide material, nonpublic information regarding certain public companies’ releases of significant financial information or other market-moving events,” prosecutors said.
Chu, who lives in Somerset, New Jersey, is charged with one count each of conspiracy to commit securities fraud and conspiracy to commit wire fraud. He faces as much as 25 years in prison if convicted of the wire fraud charge. James DeVita, an attorney for Chu, declined to comment.
Chu’s arrest is part of a wider crackdown by Preet Bharara, the US Attorney in Manhattan, into what he last month called “rampant” insider trading. The latest push, building from the Galleon case and adding a more international reach, is centered on whether expert-network firms arranged for clients including hedge funds and mutual-fund companies, to receive nonpublic information.
Hedge funds targeted
On November 23, FBI agents searched the offices of Level Global Investors LP and Diamondback Capital Management LLC. Both hedge funds were founded by former employees of SAC Capital Advisors LP, the $12 billion hedge fund run by Steven A Cohen. Lee worked at Stamford, Connecticut-based SAC from 1999 to 2004. A third hedge fund, Boston-based Loch Capital Management, was also searched by agents, according to a person familiar with the matter.
SAC and mutual funds Wellington Management Co of Boston and Denver-based Janus Capital Group have been asked for documents as part of the probe.
Taiwan liaison
Chu was Primary Global’s Taiwan liaison and worked there about seven years, Dan Charnas, a spokesman for the firm, said in an e-mailed statement. The firm hasn’t been charged with any wrongdoing.
“Based upon recent events, PGR has severed its relationship with Mr Chu,” he wrote.
In several conversations recorded by investigators, Chu, who was born in Taiwan and became a US citizen in 1987, describes his access to numerous contacts in Asia willing to share financial information about their employers.
An unnamed employee of Broadcom “probably gave Broadcom’s revenue numbers before Broadcom’s quarter end because that is what he does,” Chu is quoted as saying in the complaint.
