New York, NY – Yesterday, Bob Nguyen, a former semiconductor vertical analyst at Mountain View, California-based expert network provider, Primary Global Research, plead guilty to conspiracy and fraud in Manhattan federal court in the latest case brought as a part of the ongoing investigation into insider trading.
Nguyen told Judge Debra Freeman that he recruited public company employees to consult with Primary Global clients, many of whom were mutual funds and hedge funds. Nguyen stated that, “I myself obtained material nonpublic information from PGR experts, often over the telephone, and then passed that information to PGR clients, directly and indirectly through other PGR employees by e-mail or telephone. I knew that certain PGR experts were providing material nonpublic information about their companies directly to PGR clients.”
“One of the goals of [Primary Global] was to recruit current employees of public companies” to “provide current material and nonpublic information about their company, including information about … revenues, suppliers and customers to [Primary Global] clients,” Nguyen explained to Judge Freeman.
In court yesterday, Assistant Manhattan U.S. Attorney described Nguyen as “a cooperating witness with the government.” In a plea agreement Nguyen signed last month with the U.S., he promises to continue to provide information to prosecutors in exchange for a lenient sentence.
According to the Wall Street Journal, Mr. Nguyen is CW-4 (cooperating witness 4) who was identified in charges brought against four technology-company managers who had worked as expert consultants, as well as a former Primary Global vice president and sales manager in mid-December.
After pleading guilty, Nguyen was allowed to remain free on his own recognizance. No sentencing date has been, though the magistrate directed that he return to court on April 11.
Mr. Nguyen’s guilty plea was particularly damning because it was the first time that anyone at an expert network provider has publically admitted that they proactively sought out experts who would share inside information about their companies with investors, in direct violation of the firm’s published compliance policies. Like most expert networks, Primary Global’s policies state that experts “are forbidden to disclose to PGR or to any of its customers or partners any material, nonpublic, confidential or proprietary information.”
And while it is unclear whether, Primary Global Research as a firm was actively peddling material nonpublic information, it certainly looks like a number of employees were willfully engaged in this type of activity, and that they were not being managed to live by their stated compliance policies or procedures.
The biggest question remaining is when prosecutors will launch the next phase of these insider trading cases. Thus far we have seen arrests and charges made against public company employees (experts), and employees of Primary Global Research, however we have not seen significant action taken against buy-side analysts or portfolio managers.
Fox Business Senior Correspondent Charlie Gasparino reported yesterday that the government’s insider trading probe could have as many as 300 targets – many of whom could work at hedge funds. We will keep an eye out for the next shoe to drop on this ongoing investigation.