U.S. court upholds ex-consultant Jiau's insider trading conviction

Reuters

By Jonathan Stempel

NEW YORK, Oct 23 (Reuters) - A federal appeals court hasupheld the conviction of Winifred Jiau, a California technologyconsultant who prosecutors said used code language to disguisean insider trading scheme in which she gave live lobsters andother gifts in exchange for nonpublic information.

Jiau, 46, is the first consultant criminally convicted in abroad U.S. insider trading sweep unveiled four years ago.

The 2nd U.S. Circuit Court of Appeals in New York onWednesday rejected Jiau's arguments that her securities fraudand conspiracy conviction was based on illegal wiretaps and thather tippers personally benefited from their disclosures.

It also upheld Jiau's four-year prison sentence but threwout a $3.12 million forfeiture order, citing an interim decisionin an unrelated case. The appeals court suggested that the sumshould be reduced, and directed a lower court to recalculate it.

Jiau, a Taiwan native and former consultant at PrimaryGlobal Research, has been incarcerated since her December 2010arrest for passing tips about financial results of chipmakersMarvell Technology Group Ltd and Nvidia Corp to hedge fund managers from 2006 to 2008.

Randa Maher, a lawyer for Jiau, did not immediately respondto a request for comment. Jennifer Queliz, a spokeswoman forU.S. Attorney Preet Bharara in Manhattan, declined to comment.

RECIPES FOR PROFIT

Known as Wini, Jiau was convicted in June 2011 afterprosecutors said she gave tips to hedge fund managers SamirBarai of Barai Capital Management and Noah Freeman of SonarCapital Management and later SAC Capital Advisors LP.

Prosecutors said hedge funds paid Jiau $208,000 for hertips, which resulted in more than $3 million of illegal profit.

Jurors at the Manhattan trial heard evidence that Jiaureferred to her Marvell and Nvidia sources as "cooks," to moneyas "sugar," and to nonpublic information as "recipes."

Jiau argued on appeal that U.S. District Judge Jed Rakoffhad erred at trial in admitting recordings of phoneconversations with her tippees, as well as transcriptions thatBarai, who was hard of hearing, had requested.

She also said her tippers did not personally benefit fromthe conspiracy despite having received from her nonfinancialbenefits, such as restaurant meals, an iPhone and the lobsters.

Circuit Judge John Walker, however, rejected these claims ina decision for the three-judge appeals court panel.

He said the recordings were admissible under Title III ofthe Omnibus Crime Control and Safe Streets Act of 1968 becausethey were made to help Barai understand them, not to blackmailor otherwise harm Jiau.

Walker also said the gifts that Jiau provided her tipperscreated "quid pro quo" relationships sufficient to show thatthey personally benefited from dealing with her.

MALPRACTICE CASE

More than 70 people have been convicted or pleaded guilty inthe insider trading probe. Jiau's trial was the first to focuson expert networking firms, which match industry experts withmoney managers seeking information about industries.

Barai and Freeman pleaded guilty, as did Jiau's tippers,Stanley Ng of Marvell and Son Ngoc "Sonny" Nguyen of Nvidia.

Galleon Group hedge fund founder Raj Rajaratnam and formerGoldman Sachs Group Inc director Rajat Gupta are amongthose convicted in the broader probe.

Jiau is separately pursuing a malpractice lawsuit againsther trial lawyers, who worked at Morgan, Lewis & Bockius.

Last month, U.S. District Judge Paul Engelmayer in Manhattansaid she could not sue roughly 400 partners at the firm, butonly those who worked on her case or supervised them.

Jiau may be released as soon as June 2014.

The case is U.S. v. Jiau, 2nd U.S. Circuit Court of Appeals,No. 11-1467.

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