At insider trial, defense attacks witness’ drug use

By Jonathan Stempel

NEW YORK (Reuters) – A lawyer for a technology consultant who faces insider trading charges tried to shatter the credibility of a key prosecution witness, citing his disoriented romp on a San Francisco street after a bad drug experience.

Noah Freeman, a former portfolio manager at hedge fund SAC Capital Advisors, has testified that he received “perfect” stock tips from the consultant, Winifred Jiau, based on inside information.

Freeman has pleaded guilty in the case and is a key cooperating witness against Jiau.

But Jiau’s lawyer, David Luttinger, tried Tuesday undermine Freeman’s character in front of the Manhattan federal jury hearing the case.

Prosecutors say Jiau, 43, passed inside tips on chipmakers Marvell Technology Group Ltd and Nvidia Corp from 2006 to 2008 to Freeman and others.

Under cross-examination, Freeman elaborated on his earlier admission to the “terrible experience” of having once used hallucinogenic mushrooms in the spring of 2009, following a decade in which he had smoked marijuana.

The Harvard University graduate, 35, said he did this, despite a “pretty strict drug policy” at SAC, where his contract guaranteed him at least $1.3 million. It is unclear whether he was referring to annual pay.

Freeman did not question Luttinger’s statement that, after having consumed mushrooms, he was found running around in his underwear on a San Francisco street, until he was picked up by an ambulance and taken to a hospital.

He said he did not give his name at the time.

“I was worried that I was going to get in trouble with SAC,” he said.

 

AT LEAST 18 INSIDE TRADES

In his testimony, Freeman also said he conducted “maybe a little more than a dozen” insider trades while employed at hedge fund Sonar Capital Management from 2005 to 2008 and ”perhaps a half a dozen” such trades at SAC, the fund where he worked from 2008 to January 2010.

Freeman testified for the government against Jiau, a former Taiwan Semiconductor Manufacturing Co Lt employee and consultant at Primary Global Research LLC.

Expert networking firms such as Primary Global match industry experts with money managers and are a focus of the government’s broad insider trading probe.

Eight people have pleaded guilty in that part of the probe. A ninth, former Primary Global employee Don Ching Trang Chu, is expected to do so Tuesday.

Jiau has pleaded not guilty. She faces as much as 25 years in prison if convicted.

Freeman also said Tuesday that several dozen times he could not recall the origin or nature of tips that Jiau might have given.

“So what we’re going on here is your memory?” Luttinger once asked, referring to Nvidia trades Freeman said he made for Sonar in 2007 based on Jiau’s tips.

“Correct,” Freeman responded.

 

FEMALE ESCORTS

Jiau’s lawyer, during the cross-examination, also suggested that Freeman might have paid for female escorts for people who fed him potential trading tips.

Freeman testified he once paid “a couple of thousand dollars” to a Taiwan karaoke bar that let two dining companions ”take a woman home,” as Luttinger put it.

He recalled having “picked up a large bill,” but said he did not “recall exactly” what it covered.

Freeman’s guilty plea in February was the first by a former SAC employee. He provided evidence that led to guilty pleas by his former close friends Donald Longueuil, who once worked at SAC, and Samir Barai of Barai Capital Management.

The respective principals of SAC and Sonar, Steven A. Cohen and Neil Druker, have not been accused of wrongdoing.

After Freeman testified, two more witnesses testified for the government. Mila Camino, a former Nvidia senior finance director, talked about that company’s compliance policies and Jiau’s interest in becoming an employee in 2007.

Thomas Carocci, a lawyer for a U.S. brokerage regulator, then said that Jiau passed in 2008 two licensing examinations concerning investments, including one in September that tested understanding of securities laws such as insider trading.

Jiau’s trial will resume Monday.

The case is U.S. vs. Jiau, U.S. District Court, Southern District of New York, No. 11-cr-00161. (Reporting by Jonathan Stempel; editing by Tim Dobbyn and Andre Grenon)