John Kinnucan Was Charged in Insider Trading Case

The government’s sprawling insider trading case netted another fish Thursday afternoon as the FBI took John Kinnucan into custody at his Portland, Oregon home.

Kinnucan, the founder of expert network firm Broadband Research LLC, was charged with one count of conspiracy to commit securities fraud, one count of conspiracy to commit wire fraud and two counts of securities fraud in the complaint unsealed Friday in federal court in New York.

Insider Trading 3

On Tuesday, a group of current and former hedge-fund traders entered not-guilty pleas to charges that they were part of an insider trading network connected to Kinnucan. The government alleges that the ring made $61.8 million trading on inside information in Dell (NASDAQ: DELL) stock.

Those entering not-guilty pleas included Todd Newman, a former portfolio manager at hedge fund Diamondback Capital Management, Anthony Chiasson, co-founder of hedge fund Level Global Investors, Joe Horvath, a technology analyst at SAC Capital’s Sigma Capital Management Division, and Danny Kuo, a former vice president and technology-fund manager with Whittier Trust Co.

In a real eyebrow raiser, the government alleges that Chiasson and Level Global netted more than $50 million on one trade in Dell shares using inside information. Three other analysts that have been charged in the scheme to illegally trade in Dell stock have entered guilty pleas and are cooperating with the government. They are Jesse Tortora, formerly of Diamondback; Spyridon “Sam” Adondakis, a Level Global analyst; and Sandeep Goyal, a former Dell employee.

Level Global and Chiasson were clients of Kinnucan’s Broadband Research, which ostensibly connected hedge funds and other investment firms with well-placed technology industry contacts. Kinnucan also conducted channel checks and passed that information on to his clients. The government, however, alleges that Broadband was pumping its list of contacts not just for industry insight and legal information, but for illicit tips like quarterly earnings results.

The Feds allege that Kinnucan plied his roster of technology insiders with generous payments, fancy meals, and other considerations in order to get them to divulge sensitive information. For example, former SanDisk (NASDAQ: SNDK) executive Donald Barnetson pleaded guilty on Friday in federal court to one count of conspiracy to commit securities and wire fraud and admitted that he conspired with Kinnucan.

“I conspired with a consultant to provide confidential information with regard to my employer at the time, SanDisk Corp.,” Barnetson told U.S. Magistrate Judge Gabriel Gorenstein in the hearing.

The indictment against Kinnucan also explicitly mentions a wiretapped phone conversation between him and a source at F5 Networks (NASDAQ: FFIV) which took place in July 2010.

The source allegedly told Kinnucan that F5′s quarterly revenue results would come in ahead of Wall Street expectations. The government says that within hours of obtaining the inside tip, Kinnucan notified a number of his clients – and at least three of them placed trades based on the illegal information.

For his part, Kinnucan has remained defiant. In October 2010, he informed his clients in an email that the FBI had asked him to cooperate in their investigation and that he had refused. By doing this, he basically informed all of Wall Street that the FBI was looking to nail some big fish for insider trading violations and that it would be wise to cover their asses. This likely did not gain him any friends in the Justice Department and Kinnucan also went on CNBC to tell his story.

Now, it appears that the government is intent on payback. Kinnucan, however, didn’t seem too worried earlier last week prior to his arrest. He said, “I am glad the government taped my calls, because those calls contain copious exculpatory evidence, and no incriminating evidence against me.

The calls demonstrate that I was well aware of the line defining ‘inside information,’ and was careful never to cross it, even when requested to do so by my clients. This fact is amply demonstrated in the recordings of my phone conversations with clients and colleagues alike.”

In January, the Wall Street Journal reported that the fiery Broadband Research LLC founder went so far as to leave threatening messages for two federal agents who tried to get him to cooperate with the investigation. At the time, Kinnucan said that he made the calls “to force public exposure” of the agents “Constitutional violations.” In any event, his arrest probably does not come as much of a surprise – he seemed to anticipate this outcome.

In an interview last July, he said that he expected he would be arrested. “Am I a target? Yeah, absolutely,” Kinnucan said. “There’s a saying that the government indicts who they investigate, so I have always assumed that I was a target.” Kinnucan’s client list included prominent hedge funds such as SAC Capital and large money management firms such as Wellington Management Co. and Janus Capital Group, among many others.

This article is written by Benzinga’s Scott Rubin.

blog comments powered by Disqus
Insider Monkey Headlines
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months Click to see monthly returns in table format!

Lists

10 Most Influential Papers In Economics

Top 8 Biggest Charities in the US

10 Worst Celebrity Career Moves Ever

Top 10 Best Paid Tennis Stars in the World

10 Cities with High Demand for Nurses

6 of the Worst Greeting Card Messages Ever Crafted

6 Ways to Make Money in ArcheAge and Build Your Empire

10 Foods To Eat To Lower Cholesterol Levels

The 10 Most Hated Television Characters of All Time

The 30 Worst Halloween Costume Ideas Ever Brought to Horrible Life

10 Vocational Skills in Demand Today with Jobs Waiting to be Filled

10 Best Places to Visit in Central and South America

The 10 Greatest Empires in History Which Nearly Conquered the World

The 6 Cheapest Boarding Schools In America 2015

5 Clear Reasons LoL is Better than DotA, Continues to Rule MOBAs

The Only 9 Teams with a Chance to Win the Super Bowl

The 15 Most Common Phobias in America that Induce Fits of Panic

Top 6 Least Expensive Tourist Destinations in 2014

Jim Goetz, Peter Fenton, Jim Breyer: Top 6 Venture Investors for 2014

Top 15 Billionaires in 2014

5 Pitfalls To Avoid When Buying a Franchise

Top 20 Medical Schools in the US – 2014 Rankings

4 Business Strategies that Turned Jamie Oliver into the World’s Richest Chef

6 Qualities That Make You A Good Team Player

10 High Paying Seasonal Jobs in America this Holiday Season

The 10 Busiest Shipping Lanes in the World

5 Most Valuable Brands in China

The 10 States with Highest Substance Abuse Rates Crippling Their Populace

The Top 10 Things to Do Before You Die That Will Echo for Eternity

The 10 Best Selling Items on Etsy

Top 10 Things to Do in Tokyo, the Greatest City in the World

10 Mistakes on Social Media that Can Harm You and Will Probably Get You Canned

The 10 Best Cities to Find Jobs in 2014

The 10 Most Controversial Songs Of All Time to Hit (and get Banned from) the Airwaves

The 20 Biggest IPOs in US History

The 10 Best Places to Visit in Mexico that Are Beautiful and Safe

7 Bad Habits that Age You Beyond Your Years

The 40 Best Fortune Cookie Sayings That Will Leave You Bemused, Befuddled, or Beguiled

10 Foods to Eat Before a Workout to Make Every Drop of Sweat Count

The 5 Best Documentaries On Netflix You Must See

The Most Heartwarming and Inspirational Story Of This Halloween Season, It Will Make You Cry and Jump For Joy

10 Best Party Songs of All Time to Bring the House Down With

5 New World Order Conspiracy Theories that Will Strangle the World

The 10 Highest Rated Movies of 2014

The 10 Largest Container Shipping Companies in the World

The 10 Largest Armies in the World: Who Should We Be Afraid Of?

Best Warren Buffett Quotes on Money You Need to Hear

The 10 Highest Suicide Rates by Profession

The 20 Most Underrated Movies of All Time

The 10 Fastest Growing Companies in America

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 47.6% in its first year! Wondering How?

Download a complete edition of our newsletter for free!