A former hedge fund founder was found guilty in a Manhattan federal courtroom last week after spending more than two days on the stand in his own defense telling the nine-woman, three-man jury he was innocent.
Doug Whitman, 54, founder of Whitman Capital LLC, was convicted on two counts of conspiracy for trading illegal tips and two counts of securities fraud. With the conviction on all counts, Whitman could face a maximum sentence of 50 years in prison.
Prosecutors argued that Whitman illegally made $900,000 for his Menlo Park,
California-based hedge fund company from insider technology stock tips. In a rare defense tactic for insider trading cases, defense attorneys allowed Whitman to testify in his own defense that he never believed his sources knew of any secret information regarding the stocks in question and how they were traded.
U.S. Prosecutor Preet Bharara, stated that Whitman now joins a long line of Wall Street professionals who thought they could break the rules and get away with it. Whitman testified that all the trades in question were made in good faith and came from legitimate research. The stocks traded were from Google, Polycom and Marvell Technology Group Ltd.
The conviction follows a long line of insider guilty pleas and verdicts won in similar cases since 2009, stemming from a law enforcement initiative that began five years ago by the Federal Bureau of Investigation and the prosecutor's office. "Operation Perfect Hedge" has resulted in 66 successfully prosecuted insider trading cases for Bharara's office since then
Source: New York Times, "Hedge Fund Manager Found Guilty of Insider Trading," Peter Lattman, August 20, 2012
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