Let's say you have a friend, a close friend, and the two of you have a dark secret .... one that involves criminal activity. Nothing grossly sinister like a murder or armed heist, but still obviously illegal .... something along the lines of a hot stock tip from an inside source. Could you trust that friend with the secret to never tell on you? Well the answer has revealed itself in recent insider trading cases and that answer is "NO".
Winifred Jiau worked as a consultant at Primary Global Resources, which provided "expert" consultations with hedge fund managers. Jiau recruited two friends at Nvidia and Marvell to provide her information on those companies' corporate earnings prior to being released to the public .... inside information. When approached by authorities, Jiau's source at Nvidia, Sonny Nguyen, began cooperation with authorities and testified against Jiau at her trial and provided incriminating information to the FBI on the source at Marvell, who was also a friend. Did the betrayal of friendship payoff? Jiau is currently serving four (4) years in prison while Mr. Nguyen walked away with probation.
In the same case, hedge fund portfolio managers Noah Freeman and Donald Longueuil were on the receiving end of Winifred Jiau's information, making trades that would yield their firms millions in profits. When the FBI approached Freeman with a recording of him speaking with Jiau, he decided quickly to cooperate. Part of that cooperation would be making a call to his friend, and best man at his wedding, Donald Longueuil. That call was recorded by the FBI and the information led Longueuil to plead guilty of charges, including one for obstruction of justice (destroying evidence) that Longueuil did at the behest of his friend (now former friend) Freeman. Longueuil is now serving 30 months in federal prison. Freeman also went on to testify at the trial of Winifred Jiau ... what are friends for. While both Longueuil and Jiau are well into their prison terms, Freeman has yet to be sentenced and remains free on bond. It is expected that his prison term, if he gets one, will be significantly less than that of Longueuil.
In another case, Garrett Bauer had been friends with Kenneth Robinson for over twenty (20) years. For seventeen of those years, Robinson fed inside information to Bauer that he received from a lawyer friend on pending acquisitions. The triad went about making trades on the information and sharing in millions in profits, until the feds showed up to talk to Mr. Robinson about some suspicious trading and cash withdrawals from his bank. Once confronted, Robinson began to cooperate with authorities and even wore a wire to record incriminating conversations. Bauer, who is scheduled to be sentenced on June 4th, is looking at a guideline sentence of 9-11 years ... the same for the lawyer who provided the tip. As for Robinson, he could walk away with probation.
The real lesson here is not that you cannot trust your friends, it is that you have no friends when the FBI shows up at the door. It is a fight for self-preservation and instinct rules the day.
At a recent event at Baruch College, high-profile white-collar attorney Michael Bachner gave a warning to an audience of students, "Stay as far away from this stuff [white-collar crime] as you can." I could not agree more .... and I think I also speak for the "friends" mentioned above.