SAN FRANCISCO—U.S.-based employees of Taiwan Semiconductor Co. Ltd. and Advanced Micro Devices Inc. were among four men charged by U.S. government authorities Thursday (Dec. 16) in an alleged insider trading scheme.
"Today’s charges allege that a corrupt network of insiders at some of the world’s leading technology companies served as so-called 'consultants' who sold out their employers by stealing and then peddling their valuable inside information," said Preet Bharara, the U.S. Attorney for the Southern District of New York, in a statement.
The charges were filed as part of an ongoing investigation by the U.S. Attorney's office and Federal Bureau of Investigation of insider trading allegations against hedge funds and others. Several subpoenas have been issued in recent weeks, and investigators have raided the offices of some firms.
According to a statement released by Bharara's office, Manosha Karunatilaka, a business development manager at TSMC's North American subsidiary, provided confidential TSMC information to clients of Primary Global Research LLC, a so-called "expert network" that provides consultation services to institutional investors.
The confidential information Karunatilaka provided included product sales and shipping information, according to the statement.
Karunatilaka was paid more than $35,000 by Primary Global Research for consultation services between January 2008 and June 2010, according to the statement.
According to a Reuters report Thursday, Karunatilaka was approached over the summer by FBI agents, who asked him to cooperate with the investigation.
Others charged in the probe Thursday included Mark Anthony Longoria,a former supply chain manager at AMD, James Fleishman, an executive at Primary Global Research and Walter Shimoon, a business development director at Flextronics International Ltd.
Daniel Devore, a former global supplier manager for Dell Inc., previously pled guilty to wire fraud and conspiracy to commit wire fraud and securities fraud as part of the same investigation, according to the U.S. Attorney.
The statement from the U.S. Attorney's office alleges that Longoria provided confidential AMD information to Primary Global Research clients. For example, during telephone calls in July 2009, Longoria provided inside information about AMD's revenue, average sales prices, product sales figures and gross margins, according to the statement, which cites witnesses cooperating in the FBI's investigation of Primary Global Research.
Longoria was paid more than $200,000 for consultation services by Primary Global Research between January 2008 and March 2010, according to the U.S. Attorney.
The U.S. Attorney alleges that Shimoon provided Primary Global Research clients with confidential information about Flextronics and Apple Inc., which was a customer of Flextronics. This information included sales forecasts and the disclosure of new features for Apple's iPhone, according to the U.S. Attorney.
Shimoon was paid $22,000 between January 2008 and June 2010 by Primary Global Research, according to the statement.
Fleishman was arrested on wire fraud and conspiracy charges for conspiring to provide confidential information, including material, nonpublic information to Primary Global Research clients, including hedge funds, the U.S. Attorney said.
"The information trafficked by the four 'consultants' went way beyond permissible market research; it was insider information," said Janice Fedarcyk, the FBI assistant director in charge of the investigation.
"This wasn't market research," Fedarcyk added. "What the defendants did was purchase and sell insider information. Our investigation is most assuredly continuing."
TSMC said it terminated Karunatilaka Thursday. "His actions have violated multiple company policies, including our proprietary information protection and ethics policies," a spokesperson said through a statement.
TSMC has cooperated with the U.S. Justice Department in this matter and will continues to do so, the spokesperson said. The company will consider taking additional legal action as appropriate, the spokesperson said.
AMD circulated a brief statement saying that the company has been cooperating with the U.S. Attorney's office and would continue to do so. "It appears that AMD is the victim of an insider trading scheme," the statement read.
AMD also said Longoria resigned from the company on Oct. 22. According to a company spokesperson, AMD has a clear and comprehensive policy against insider trading and a policy that precludes employees from doing the type of consulting work that Longoria is alleged to have done for Primary Global Research.
A spokesperson for Flextronics declined to comment on
the charges, citing company policy. But the spokesperson said Shimoon
has been terminated.