Chu Gets Off Easy


Don Ching Trang Chu, a former employee at Primary Global Research LLC (PGR), received a light sentence last week for passing confidential information to investor clients.   Although he faced up to six months in prison on charges of conspiracy to commit securities fraud and conspiracy to commit wire fraud, Chu was given two years’ probation, and allowed to return to Taiwan.

U.S. District Judge Jed Rakoff said during sentencing that jail wasn’t warranted for Chu because of his “minimal” role in the scheme.  “The defendant did not financially benefit from this conduct and otherwise has had a clear record,” Rakoff said. “There is just no doubt that this is a serious crime that needs general deterrence, but his role was so minimal compared to other defendants, so I am persuaded to agree and impose a sentence of two years’ probation.”

In contrast, Donald Longueuil, a former hedge-fund manager at SAC Capital Advisors, was sentenced to 2.5 years in prison after pleading guilty to insider-trading charges.  Unlike Chu, Longueuil had not cooperated with prosecutors, and had traded on the inside information he received.

Daniel DeVore, an expert affiliated with PGR who cooperated with prosecutors was sentenced in July to disgorge the payments he received from PGR plus interest, totaling slightly over $150,000.  However, DeVore’s sentencing under criminal statutes was postponed for three years to allow the investigation time to run its course.  Like Chu, DeVore is a cooperating witness, and was expected to testify at the trial of James Fleishman, a salesperson for PGR accused of conspiracy to pass inside information.

Winifred Jiau, a former PGR expert convicted of passing inside tips on publicly traded companies, is facing 8 to 10 years in prison based on the sentencing guidelines.  Prosecutors have asked for 10 years, arguing that she tried to obstruct the investigation and that she helped Longueuil and his co-conspirators make from $2.5 million to $7 million in illegal profit.  Sentencing is scheduled September 21.

Meanwhile, prosecutors are seeking a sentence of 19 1/2 to 24 1/2 years for Raj Rajaratnam at his sentencing on Sept. 27.  Prosecutors argue that Rajaratnam “remains defiant” because he told a probation officer after the trial that he was unclear about what constitutes inside information: ““In my own mind, the line between permissible ‘detective work’ and impermissible insider trading was not always clear, especially with regard to companies broadly covered by the news media as to which there was a wealth of publicly available information, including frequent leaks, rumors and speculation about corporate transactions and other important developments,” Rajaratnam told the probation officer, according to prosecutors.

Chu was arrested in November 2010 and pleaded guilty in June to conspiracy to commit securities fraud and conspiracy to commit wire fraud. He was the Taiwan liaison for PGR and he admitted to being present at meetings where PGR consultants disclosed material, non-public information.  Prosecutors said Chu facilitated a conversation in July 2009 between Richard Choo-Beng Lee, a former Galleon trader who cooperated with prosecutors, and an unidentified employee of a publicly traded technology company who allegedly passed inside information.

Chu joined Primary Global in 2004 and helped the company establish a Taiwan office, according to court papers. Chu initially believed that the firm’s actions were “legal and above board” and didn’t learn that Primary Global employees weren’t abiding by prohibitions against passing confidential information to clients until after he began carrying out supervisory duties, his lawyer said.


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