December 17, 2010 – Several executives from tech-industry stalwarts including AMD, Dell, and TSMC have been rounded up by the FBI in an investigation into alleged insider trading, according to the US government.
The FBI in New York said it had arrested James Fleishman of Primary Global Research was arrested on wire fraud and conspiracy charges, for "conspiring to provide confidential information" to some of the firm’s clients," including hedge funds, with "up-to-the-minute intelligence on trends, issues, regulations and dynamics affecting a particular company, product or industry." This investigation reportedly is an offshoot of the similar Galleon insider trading case last year that highlighted too-cozy relationships with IBM and Intel, among others.
Thanks to SEC rules, hedge funds are always seeking new ways to get hot info, and legality is becoming a grey area. Forbes’ Colette Martin suggests that conspiracy isn’t really that far removed from just really deep research: ""One man’s due diligence is another man’s fraud."
But in this case, "the information trafficked by the four ‘consultants’ went way beyond permissible market research; it was insider information," said Janice Fedarcyk, FBI assistant director-in-charge, in a statement.
Those sources arrested include:
- Walter Shimoon, former senior director of business development at Flextronics: Provided information and forecasts regarding Apple purchases, or shipping orders regarding certain Flextronics accounts, as well as information about other Apple suppliers. Among his revelations: secret talks in 2009 between Apple and Flextronics about a black-ops project that would eventually become the iPad. (The San Jose Mercury News (adds some color to this, including the iPad’s early code-name and rabidity for secrecy.)
- Manosha Karunatilaka, former account manager at TSMC, who provided information including wafer bookings, starts, and forecasts, pricing and margin information, and shipping information, including "the inventory situations of various customers." He got >$35K in about 18 months for his "consulting services."
- Mark Anthony Longoria, former supply-chain manager at AMD: Allegedly provided AMD revenue information, average sales prices, product sales figures, and gross margin information; for two years through March 2010 he was paid >$200K for his "consultation services." (The SJMN says he was particularly "proficient at providing accurate forecasts of that company’s [pre-public] quarterly finances].) When told by Fleishman that Galleon was not a PGR client, Longoria reportedly was relieved, noting that Galleon had been "trading AMD, and I was like, ‘oh crap!’"
- Daniel Devore, former global supply manager for Dell: He raked in about $146K from late 2007 through August 2010 for sharing information about Dell and its suppliers.