Closure on an Expert Network Drama

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An appeals court ruled last week that the former employee of an expert network no longer had to pay restitution, ending an unfortunate story involving blackmail and suicide.

Paul Kuruzovich, a former sales manager at Guidepoint Global LLC, was charged in August 2009 with theft of information from Guidepoint which he was allegedly marketing as his own.   He was also charged with blackmail.  According to court documents, he wrote emails to Guidepoint Global threatening that he would inform law enforcement authorities that the firm had engaged in insider trading unless he received commissions, benefits, and severance payments he believed he was owed.

A Critical Period

This was a particularly sensitive time for Guidepoint Global, which acquired Vista Research in May, 2009, just a few months before Kuruzovich was charged.  It was also a sensitive time in the insider trading investigations, even though it would be over a year before charges against expert network Primary Global would surface publicly.

Richard Choo-Beng Lee, a defendant in the Galleon case, had begun cooperating with federal prosecutors in April 2009, and was alleging that his hedge fund was receiving inside information from Primary Global.  Kuruzovich’s allegations of insider trading at an expert network would have caught prosecutors’ attention.  However, his allegations ended up in indictments against Kurozovich for intellectual property theft and blackmail.  The federal complaint against Kuruzovich was signed by none other than Preet Bharara.

The Wall Street Journal

Federal criminal charges and a bail order expressly forbidding Kuruzovich from contacting Guidepoint Global did not deter him from calling the firm posing as a Wall Street Journal reporter seeking comment about a federal search warrant about to be executed at the company’s offices, causing alarm at the firm and precipitating a call to the U.S. Attorney’s office by company counsel.

He also allegedly contacted a Wall Street Journal reporter about his insider trading allegations.  According to court documents, the reporter was planning to run the story until dissuaded by Guidepoint’s counsel.  Guidepoint Global has not been accused of insider trading or of passing inside information in any of the federal indictments.

Sentencing & Suicide

The charge of intellectual property theft was subsequently dropped, and Kuruzovich pleaded guilty in June, 2011 to one count of blackmail. He was sentenced to a twelve month term of imprisonment and a period of supervised release of one year.  He was also ordered to pay Guidepoint Global restitution in the amount of $59,652.85, for legal fees it incurred in the case against him.

Kuruzovich appealed the restitution portion of the judgment, challenging the district court’s conclusion that restitution was mandatory as well as the amount ordered.

After serving his one year prison term, Kuruzovich committed suicide in New York in June of this year.  After the suicide, Guidepoint no longer sought compensation from Kuruzovich’s estate for its losses and the appeals court decided to abate the restitution order while affirming the judgment of conviction in all other respects, ending the sad, messy affair.

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