Expert Network Cases -- The Race to Plead Guilty

When the feds come calling, there is a certain fear that comes over those who once felt above the law.  This causes a mad rush to the courthouse to see if a member of the once thriving conspiracy can get a better deal than the others involved.  In our justice system, the first one who enters a guilty plea usually gets the best deal (least years in prison) because they are offering the best information on those still proclaiming their innocence.  In their rush to save their own tails from spending years in prison by cooperating, are these plea deals skewing the justice system so that the most corrupt, or more corrupt, are getting more lenient sentences than they should as compared to the others?

This is going to play out in the expert network investigation and subsequent arrests.  Richard C.B. Lee of Spherix Capital was the first of 14 people who cooperated in the insider trading scheme that revolved around information from sources connected with expert network firm Primary Global Research.  Having cut a deal with the feds, Lee began to tell about his own crimes of trading on inside information and agreed to wear a wire for the feds to tape others’ conversation that might be incriminating.  Lee has an agreement that provides that the government will grant a Section 5K1.1 of the Sentencing Guidelines to him…a recommended deviation from mandatory prison sentence, which can be lengthy.  For Lee, he was looking at 25 years for his crimes related to securities fraud….but he was also the guy profiting from the information he was receiving through trading on the stock.  Lee’s plea agreement with the government also implies that he has some tax issues with the government that are unresolved.  But he was the first one in, so should he get the best deal?

Below is a list of those who have pled guilty, their employer and the date of their plea.  Since none of these have been sentenced yet, it is anyone’s guess as to how this will play out as far as fairness in sentencing will go.  But we should watch this carefully.  Should not the person who profited the most from the crime receive a longer sentence than the person who was providing the information for a fee (millions in gains versus a few thousand for the information)?  Or should the sentences be based on a calling to one’s own conscience to do the right thing?

1. Richard C.B. Lee – Spherix Capital (previously at SAC Capital Advisors), Pled Guilty October 8, 2009 (first to plead guilty)
2. Daniel DeVore – Dell Computer, Pled Guilty December 10, 2010
3. Karl Motey – Coda Group, Inc., Pled Guilty December 14, 2010
4. Jason Pflaum – Barai Capital, Pled Guilty December 14, 2010
5. Bob Nguyen – Primary Global Research, Pled Guilty January 12, 2011
6. Noah Freeman – SAC Capital Advisors, Pled Guilty February 7, 2011
7. Donald Longueuil – SAC Capital Advisors, Pled Guilty April 28, 2011
8. Manosha Karunatilaka (37) – Taiwan Semiconductor Manufacturing Company, N.A., Pled May 11, 2011
9. Samir Barai – Barai Capital Management, Pled Guilty May 27, 2011
10. Don Chu (57) – Primary Global Research, Pled Guilty June 7, 2011
11. Winifred Jiau (43) – Consultant for Primary Global exclusively for Barai Capital, Guilty at Trial June 20, 2011
12. Mark Anthony Longoria – Advanced Micro Devices, Pled Guilty June 30, 2011
13. Walter Shimoon (39) – Flextronics Intl., Pled Guilty July 5, 2011
14. James Fleishman – Primary Global Research, Trial scheduled for August 2011 in front of Federal Judge Jed Rakoff

One person who did not blaze the trail to the courthouse to cooperate was Winifred Jiau (43).  Jiau, a Taiwanese born U.S. citizen, was a consultant for Primary Global Research who was providing information to Barai Capital (Samir Barai and Noah Freeman).  Barai and Freeman have pleaded guilty and Freeman even cooperated to a level that threw his best friend, Donald Longueuil, under the bus through wire taps.  Jiau, convicted with evidence that showed her in a poor light (lobster loving, overbearing, cliché texting pain in the a$$), currently sits on the 2^nd floor of the Metropolitan Correctional Center (MCC) in lower Manhattan.  Her crime was passing insider information to Barai on technology companies Nvidia and Marvell in exchange for payments of $200,000 between 2006 and 2008.

Since her arrest in December 2010, Jiau was unable to meet the bail requirements, as all of the others listed were able to do.  Jiau, who was arrested at her home in Fremont, CA, was transferred courtesy of Con Air (the informal name of the Bureau of Prison’s inmate transfer network) through seven different prisons across the country and finally made it to New York after 43 days.  Those facilities along the way were of a higher security level than prison camps where most non-violent offenders reside.  She spends her time reading and is allowed one hour of exercise in a rooftop cage where she plays racquetball.  Having no family in the U.S., and few friends since her arrest, she spends her days trying to figure out when this nightmare is going to end.  Why she went to trial with a court appointed attorney in June is still something I struggle to understand.  Having been found guilty on June 20^th, she is likely to get 10 years in prison when she is sentenced this September.  Will Jiau get the most time of all of those in this scheme where she was only a small part of this conspiracy?

Then there is James Fleishman, formerly of Primary Global Research, who has a trial date set in August with Federal Judge Jed Rakoff presiding….the same judge that oversaw Jiau’s trial.  He still has time to enter a guilty plea, but he does not have anyone to tell on since the others are in jail or on their way… so he may as well go on to trial.  This is our justice system.

If there are staggered sentences in these cases based on the timing of a plea agreement, then it should cause us to look at how justice is handed out in these large conspiracies.  Should a person be punished because of timing to enter a guilty plea or for even attempting to defend oneself?  Let us hope not.

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