The New York Times on February 16, 2012 released the following:
“BY AZAM AHMED AND BEN PROTESS
The government’s crackdown on insider trading has ensnared one of the most vocal critics of the campaign to root out illegal information swapping on Wall Street.
John Kinnucan, a technology analyst who gained notoriety last year for openly challenging federal authorities, was arrested on Thursday night by the Federal Bureau of Investigation. His lawyer could not be immediately identified.
It is the latest twist in one of the more bizarre chapters of the government’s years-long investigation. Mr. Kinnucan is the most recent individual charged in the government’s wide-ranging case, which has resulted in 60 convictions and guilty pleas.
Federal agents first approached Mr. Kinnucan at his Portland, Ore., home in late 2010, asking the independent analyst to cooperate with an investigation into several hedge fund clients, a list that included the behemoths Citadel and SAC Capital Advisors. Mr. Kinnucan balked, then fired off an e-mail to warn his clients.
“Today two fresh faced eager beavers from the FBI showed up unannounced (obviously) on my doorstep thoroughly convinced that my clients have been trading on copious inside information,” the email said. “We obviously beg to differ, so have therefore declined the young gentleman’s gracious offer to wear a wire and therefore ensnare you in their devious web.”
Neither Citadel nor SAC Capital has been accused of any wrongdoing.
In the months after the e-mail surfaced, Mr. Kinnucan granted dozens of interviews to the media, lambasting the government’s efforts while defending himself. Later, his communications grew stranger, and included expletives and racial epithets targeted at specific law enforcement personnel, daring them to arrest him.
In charging Mr. Kinnucan, the government is alleging that he participated in an insider-trading ring involving some of the biggest hedge funds in the world. The case is related to a continuing investigation into expert networks, organizations that connect business executives with investors interested in their companies and fields.
As a principal at the research firm Broadband Research, Mr. Kinnucan maintained a list of impressive clients, who bought his technology sector analysis. Last summer, Mr. Kinnucan’s name surfaced during the guilty plea of a technology company executive, who indicated he had passed the analyst inside information about Apple and Cisco, among other companies.
In a piece written for DealBook, Mr. Kinnucan described why he refused to cooperate with the authorities. He said he was offended first that the agents arrived at his home just before his wife and children were due home from school. But he also said that cooperating would have violated his principles.
“I had to decide between committing a wrong — agreeing to try to entrap someone whom, based on our mutual dealings, I believe to be innocent — or standing up to fight for what I believe is right,” he said. “I chose the latter.”
As for his research, Mr. Kinnucan said there was nothing illegal about it.
“The type of research I provide to clients is pervasive in the financial community, the same kind of analysis provided not only by all investment banks, large and small, but by an ever-expanding group of research boutiques, virtually all larger than mine,” he wrote.”
Douglas McNabb – McNabb Associates, P.C.’s
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