Fremont woman arrested in Silicon Valley insider trading case involving Marvell, Nvidia information

McClatchy-Tribune Information Services via COMTEX) — Federal authorities on Wednesday announced the arrest of a Fremont woman as part of the widening investigation into the alleged sale of some of Silicon Valley’s most closely guarded secrets to hedge funds greedy for illegal inside information.

FBI agents took Winifred Jiau, 43, of Fremont, into custody Tuesday. The development is the latest in a broadening case involving Primary Global Research, a Mountain View investment advisory firm for which Jiau was an “expert consultant” between 2006 and 2008. She was also a contractor for Nvidia, the Santa Clara graphics chip maker.

Jiau, charged with securities fraud and conspiracy, made her first court appearance Wednesday and remains in custody.

Jiau is alleged to have received more than $200,000 from hedge funds between 2006 and 2008 in return for confidential information she obtained from employees of Nvidia and Marvell Technology Group, also of Santa Clara.

Five others with ties to Primary Global, including an employee, were arrested this month. They are accused of making tens of thousands of dollars trafficking in Silicon Valley technology and financial secrets from Apple, Seagate Technologies and Advanced Micro Devices, including information about the iPad, then code-named “K48.” Another employee of the firm was arrested in November. Primary Global has not been charged in the case.

The federal complaint against Jiau said she dealt with the managers of two unnamed hedge funds.

Part of the evidence against Jiua is recordings, seized by investigators, of phone conversations she had with the manager at one of the funds, in which she allegedly furnished exact earnings information she obtained from employees of the companies.

Jiau’s source at Marvell is described only as a male; she described her source at Nvidia as “a sales guy” who was in contact with someone in finance.

The two sources allegedly furnished quarterly earnings figures before they were publicly announced, allowing the hedge fund managers to buy and sell stock based on the information before other investors knew about it.

On Aug. 8, 2008, Jiau allegedly told one hedge fund manager that Nvidia would report “892” for the second quarter. Nvidia reported $892.7 million for the quarter on Aug. 12.

Asked if her source had any data on the next quarter, Jiau allegedly said, “No. Usually “… he will get a e-mail “… from the finance, he’s the sales guy and so far he hasn’t gotten the whole picture “… as soon as I get it, I give you guys a buzz.” In another conversation, in May 2008, Jiau allegedly told the hedge fund manager that Marvell would report about $805 million in revenue for the second quarter with a gross profit margin of 51.6 percent and earnings per share of 11 cents.

Later that month, the company reported its results: net revenue of $804 million, gross margin of 52 percent and earnings of 11 cents per share.

The hedge fund bought more than 300,000 shares of Marvell between May 23 and May 29, selling its entire position by June 11, netting more than $820,000 in profit, the federal complaint states.

Primary Global, a so-called expert networking firm, links investors with employees of publicly traded companies for a fee. The employees are paid for the time they spend talking to investors. The process is legal as long as no inside information is disclosed.

Such expert advisory networks are an increasingly common phenomenon since the adoption of stricter federal rules against publicly traded companies providing company information to select investors.

The U.S. attorney’s complaint didn’t name the expert advisory company Jiau’s payments were made through, but the description closely matched that of Primary Global, which issued this statement: “Winifred Jiau served as an expert consultant with Primary Global Research from September 2006 through December 2008, at which time the relationship was ended. The company has no further comment.” Nvidia said Jiau had been a contractor until about a year ago. Marvell did not respond to a request for comment.

The wide-ranging insider-trading probe developed from an investigation that began last year into the Galleon hedge fund run by billionaire Raj Rajaratnam, which led to 23 arrests.

The co-founder of the Spherix hedge fund of San Jose, Richard Choo-Beng Lee, became a cooperating witness after the Galleon investigation and helped federal agents record conversations with a Primary Global employee.


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