(AP) A San Francisco hedge fund founder was convicted of insider trading charges Monday by a jury that rejected his claims that he was careful never to trade based on secrets he received about public companies.
Doug Whitman, whose hedge fund oversaw roughly $100 million, was convicted of all charges against him. Only days earlier, the Manhattan federal jury heard him testify that he took pains to trade only on legal information gleaned from employees at public companies and from analysts.
Whitman, the 54-year-old founder of Whitman Capital, was the only defendant to testify among dozens charged in a wide ranging crackdown since 2007 on insider trading by federal authorities. Nearly all of those charged have pleaded guilty or been convicted at trial.
Sentencing was set for Dec. 20.
"Douglas Whitman now joins the grim procession of convicted Wall Street professionals who decided that the rules don't apply to them. The rules do apply," U.S. Attorney Preet Bharara said in a statement issued immediately after the verdict. "Mr. Whitman had a hedge fund with his name on the door, with rules against insider trading. He flouted those rules, tarnished his name and now is a convicted felon facing imprisonment."
Prosecutors said Whitman made nearly $1 million between 2006 and 2009 by receiving inside tips about the earnings of public companies.
He testified that he was careful not to make trades based on inside information whenever he came across it. He said he believed employees at publicly traded companies could tell him generally how a quarter was going as long as they did not give him exact numbers.
He said that if he were talking to someone in a company's management, he would decide whether he could use the information based on "if I thought that they knew the number or they were just making a guesstimate."
He later added: "If you think that the person knows the number, that's wrong."
Over the span of three weeks, jurors heard testimony that Whitman's hedge fund made trades from 2007 to 2009 based on inside information related to Google Inc., Marvell Technology Group Ltd. and Polycom Inc.
Whitman was convicted of two counts of securities fraud and two additional counts of conspiracy to commit securities fraud. The charges carry a potential penalty of up to 50 years in prison, but his sentence will likely be far less than that.
So far, the longest sentence to result from the Manhattan probe was 11 years given to Raj Rajaratnam, who was convicted at trial. Prosecutors said the one-time billionaire and Manhattan hedge fund founder made as much as $75 million trading illegally.