It’s not often that Manhattan U.S. Attorney Preet Bharara gets to deliver zingers.
But there was plenty of comic relief at a joint news conference he held today in New York with Securities and Exchange Commission Enforcement Director Robert Khuzami announcing insider-trading charges against three hedge fund managers and an analyst, thanks to the hapless defendants.
“It’s like something out of a bad movie,” Bharara quipped, while standing next to a chart with quotes describing defendants’ alleged attempts to destroy evidence.
After news broke last November that the Southern District of New York had launched an investigation of so-called “expert network” companies that consult with investment funds, one of the people charged today, Donald Longueuil of CR Intrinsic Investors LLC, destroyed a flash drive and two external hard drives containing potential evidence against him, the federal complaint said.
He used pliers to pull the drives apart, then he placed them in separate plastic baggies and left his New York apartment at around 2 a.m. ”I put this stuff inside my black North Face” jacket, Longueuil said in words caught on federal wiretaps. “I go on like a twenty block walk around the city,” throwing the destroyed drives “in the back of like random garbage trucks,” he said.
Said Bharara: “It may be the first ever documented use by a portfolio manager of pliers as a tool of the trade.”
The SDNY has increasingly used surveillance techniques like wiretaps to go after financial crime. The chart, he said, is ”Exhibit A for why we sometimes have to resort to wiretaps and body wires to investigate even white collar crime on Wall Street.”
Also charged in the matter were Samir Barai, age 39, of Barai Capital Management; Barai technology analyst Jason Pflaum, age 38; and another hedge fund manager, Noah Freeman. “Just go into the office [and] … shred as much as u can,” Barai told Pflaum in an electronic message, the complaint said.
“When people frantically begin shredding sensitive documents, and deleting computer files and smashing flash drives and chasing garbage trucks at 2 a.m. … it is not because they have been operating legitimately,” Bharara added, according to a Wall Street Journal account. “It is because they have broken the law, they know it and they don’t want to get caught.”