Insider Inquiry Steps Up Its Focus on Hedge Funds

By PETER LATTMAN and AZAM AHMED
NYT

The government has taken its strongest action against hedge funds as part of a vast investigation into insider trading on Wall Street.

Federal prosecutors on Tuesday announced charges against three hedge fund managers, depicting a “triangle of trust” in which the three shared tipsters and illegally pooled confidential information about publicly traded technology companies. The complaint also details a brazen cover-up that involved destroying computer hard drives with pliers and tossing them into random Manhattan garbage trucks in the dead of night.

Two of the managers charged, Noah Freeman and Donald Longueuil, were accused of insider trading while employed at SAC Capital Advisors, the Stamford, Conn., hedge fund run by the billionaire Steven A. Cohen. The two join several other former SAC employees who have been ensnared by the government’s investigation. Neither SAC nor anyone now at the fund has been accused of wrongdoing, and it is cooperating with the investigation.

The recent charges stem in part from the investigation that led to the arrest in October 2009 of Raj Rajaratnam, the billionaire co-founder of the Galleon Group and the most prominent hedge fund executive charged with insider trading. But government investigators have been increasingly examining hedge fund traders’ use of so-called expert network firms. These research firms are essentially matchmakers, connecting hedge funds with employees at public companies and other specialists who are paid to provide the funds with insight into their businesses and industries.

(More here.)