FBI Visit Exposes Trade-Probe Tactics>>>
The Federal Bureau of Investigation's attempt to pressure an independent analyst to record his calls with a client offers a window into how the government is trying to build what could become one of the most far-reaching insider-trading cases ever.
John Kinnucan says he was sipping wine on his front porch in Portland, Ore., on Oct. 25 when a gray sedan pulled up and two men in business suits jumped out, identifying themselves as FBI agents.
The two men accused Mr. Kinnucan, 53 years old, of passing inside information to his hedge-fund and mutual-fund clients, he says. He says they threatened to arrest him and asked him to cooperate with their investigation by tape-recording his calls with a client. Mr. Kinnucan declined the offer, and later that night he sent out a blast email to his clients detailing the visit.
The investigations, first reported by The Wall Street Journal, could lead to some charges by year's end, according to federal authorities. Representatives of the Manhattan U.S. Attorney's office, the FBI and the Securities and Exchange Commission declined to comment.
Authorities say the criminal and civil investigations could eclipse the impact on the financial industry of any previous such probes. Investigators are examining, among other things, the role of consultants and analysts who provide hedge funds and mutual funds with detailed information about the businesses and industries in which they specialize. Mr. Kinnucan's firm, Broadband Research LLC, provides clients with information about tech companies.
The client that the FBI agents wanted Mr. Kinnucan to tape his calls with is hedge-fund giant SAC Capital Advisors, headed by Steve Cohen, according to one person close to the situation. Their request suggests that the government is heightening an ongoing examination of activities at SAC. Last year, a cooperating witness in a separate insider-trading case against Raj Rajaratnam, founder of hedge fund Galleon Group, and 22 others agreed to provide information about SAC. SAC declined to comment.
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