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Bankers and Traders in Vast Insider Trading Probe

November 25, 2010 Leave a comment

By SUSAN PULLIAM, MICHAEL ROTHFELD,JENNY STRASBURG and GREGORY ZUCKERMAN 

Federal authorities, capping a three-year investigation, are preparing insider-trading charges that could ensnare consultants, investment bankers, hedge-fund and mutual-fund traders, and analysts across the nation, according to people familiar with the matter.

OnTheInside_BW

OnTheInside_BW

OnTheInside_BW

The criminal and civil probes, which authorities say could eclipse the impact on the financial industry of any previous such investigation, are examining whether multiple insider-trading rings reaped illegal profits totaling tens of millions of dollars, the people say. Some charges could be brought before year-end, they say.

The investigations, if they bear fruit, have the potential to expose a culture of pervasive insider trading in U.S. financial markets, including new ways non-public information is passed to traders through experts tied to specific industries or companies, federal authorities say.

One focus of the criminal investigation is examining whether nonpublic information was passed along by independent analysts and consultants who work for companies that provide “expert network” services to hedge funds and mutual funds. These companies set up meetings and calls with current and former managers from hundreds of companies for traders seeking an investing edge.

Among the expert networks whose consultants are being examined, the people say, is Primary Global Research LLC, a Mountain View, Calif., firm that connects experts with investors seeking information in the technology, health-care and other industries.

“I have no comment on that,” said Phani Kumar Saripella, Primary Global’s chief operating officer.

Primary’s chief executive and chief operating officers previously worked at Intel Corp., according to its website.

In another aspect of the probes, prosecutors and regulators are examining whether Goldman Sachs Group Inc. bankers leaked information about transactions, including health-care mergers, in ways that benefited certain investors, the people say. Goldman declined to comment.

Independent analysts and research boutiques also are being examined. John Kinnucan, a principal at Broadband Research LLC in Portland, Ore., sent an email on Oct. 26 to roughly 20 hedge-fund and mutual-fund clients telling of a visit by the Federal Bureau of Investigation.

“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. “(They obviously have been recording my cell phone conversations for quite some time, with what motivation I have no idea.) 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.”

The email, which Mr. Kinnucan confirms writing, was addressed to traders at, among others: hedge-fund firms SAC Capital Advisors LP and Citadel Asset Management, and mutual-fund firms Janus Capital Group, Wellington Management Co. and MFS Investment Management.

SAC, Wellington and MFS declined to comment; Janus and Citadel didn’t immediately comment. It isn’t known whether clients are under investigation for their business with Mr. Kinnucan.

The investigations have been conducted by federal prosecutors in New York, the FBI and the Securities and Exchange Commission. Representatives of the Manhattan U.S. Attorney’s office, the FBI and the SEC declined to comment.

Another aspect of the probe is an examination of whether traders at a number of hedge funds and trading firms, including First New York Securities LLC, improperly gained nonpublic information about pending health-care, technology and other merger deals, according to the people familiar with the matter.

Some traders at First New York, a 250-person trading firm, profited by anticipating health-care and other mergers unveiled in 2009, people familiar with the firm say.

A First New York spokesman said: “We are one of more than three dozen firms that have been asked by regulators to provide general information in a widespread inquiry; we have cooperated fully.” He added: “We stand behind our traders and our systems and policies in place that ensure full regulatory compliance.”

Key parts of the probes are at a late stage. A federal grand jury in New York has heard evidence, say people familiar with the matter. But as with all investigations that aren’t completed, it is unclear what specific charges, if any, might be brought.

[PROBEjump]

The action is an outgrowth of a focus on insider trading by Preet Bharara, the Manhattan U.S. Attorney. In an October speech, Mr. Bharara said the area is a “top criminal priority” for his office, adding: “Illegal insider trading is rampant and may even be on the rise.” Mr. Bharara declined to comment.

Expert-network firms hire current or former company employees, as well as doctors and other specialists, to be consultants to funds making investment decisions. More than a third of institutional investment-management firms use expert networks, according to a late 2009 survey by Integrity Research Associates in New York.

The consultants typically earn several hundred dollars an hour for their services, which can include meetings or phone calls with traders to discuss developments in their company or industry. The expert-network companies say internal policies bar their consultants from disclosing confidential information.

Generally, inside traders profit by buying stocks of acquisition targets before deals are announced and selling after the targets’ shares rise in value.

The SEC has been investigating potential leaks on takeover deals going back to at least 2007 amid an explosion of deals leading up to the financial crisis. The SEC sent subpoenas last autumn to more than 30 hedge funds and other investors.

“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…. 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.” John Kinnucan, of Broadband Research, in an Oct. 26 email to clients

Some subpoenas were related to trading in Schering-Plough Corp. stock before its takeover by Merck & Co. in 2009, say people familiar with the matter. Schering-Plough stock rose 8% the trading day before the deal plan was announced and 14% the day of the announcement.

Merck said it “has a long-standing practice of fully cooperating with any regulatory inquiries and has explicit policies prohibiting the sharing of confidential information about the company and its potential partners.”

Transactions being focused on include MedImmune Inc.’s takeover by AstraZeneca PLC in 2007, the people say. MedImmune shares jumped 18% on April 23, 2007, the day the deal was announced. A spokesman for AstraZeneca and its MedImmune unit declined to comment.

Investigators are also examining the role of Goldman bankers in trading in shares of Advanced Medical Optics Inc., which was taken over by Abbott Laboratories in 2009, according to the people familiar with the matter. Advanced Medical Optics’s shares jumped 143% on Jan. 12, 2009, the day the deal was announced. Goldman advised MedImmune and Advanced Medical Optics on the deals.

A spokesman for AstraZeneca and its MedImmune unit declined to comment.

In subpoenas, the SEC has sought information about communications—related to Schering-Plough and other deals—with Ziff Brothers, Jana Partners LLC, TPG-Axon Capital Management, Prudential Financial Inc.’s Jennison Associates asset-management unit, UBS AG’s UBS Financial Services Inc. unit, and Deutsche Bank AG, according to subpoenas and the people familiar with the matter.

Representatives of Ziff Brothers, Jana, TPG-Axon, Jennison, UBS and Deutsche Bank declined to comment.

Among hedge-fund managers whose trading in takeovers is a focus of the criminal probe is Todd Deutsch, a top Wall Street trader who left Galleon Group in 2008 to go out on his own, the people close to the situation say. A spokesman for Mr. Deutsch, who has specialized in health-care and technology stocks, declined to comment.

Prosecutors also are investigating whether some hedge-fund traders received inside information about Advanced Micro Devices Inc., which figured prominently in the government’s insider-trading case last year against Galleon Group hedge fund founder Raj Rajaratnam and 22 other defendants.

Fourteen defendants have pleaded guilty in the Galleon case; Mr. Rajaratnam has pleaded not guilty and is expected to go to trial in early 2011.

Among those whose AMD transactions have been scrutinized is hedge-fund manager Richard Grodin. Mr. Grodin, who received a subpoena last autumn, didn’t return calls. An AMD spokesman declined to comment.

Write to Susan Pulliam at susan.pulliam@wsj.com, Michael Rothfeld at michael.rothfeld@wsj.com, Jenny Strasburg at jenny.strasburg@wsj.com and Gregory Zuckerman at gregory.zuckerman@wsj.com

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FBI Asks Google, Facebook, To Aid Wiretapping

November 18, 2010 Leave a comment

Official portrait of the Director of the Feder...

Official portrait of the Director of the Federal Bureau of Investigations Robert S. Mueller.

Now that most Americans rarely ever use landlines but are instead occupied on the web and with their smartphones, the FBI is trying to step up its surveillance game to keep up with the times — to the detriment of our civil liberties.

Last week, agency director Robert Mueller went to Sillicon Valley (much like Mark Zuckerberg in “The Social Network“) with a somewhat frightening proposal: Facebook and Google should build “back doors” into their systems to allow ease for spying.

But groups like the ACLU says these physical mechanisms could be exploited by everyone from hackers to autocratic regimes cracking down on dissent.

“It is important to realize that this proposal isn’t simply applying the same sort of wiretap system we have for phones to the Internet; it would require reconfiguring and changing the nature of the Internet,” said Laura Murphy of the ACLU in a statement.

“We remain very concerned that this proposal is a clear recipe for abuse and will make it that much easier for the government to gain access to our most personal information. Americans should not simply surrender their privacy and other fundamental values in the name of national security.”

Even within the Obama administration, there is some consternation that the changes sought by the FBI would inhibit innovation and aid repressive regimes.

Read more at The New York Times and Raw Story.

By Sarah Seltzer | Sourced from Alternet

Posted at November 18, 2010, 7:09 am

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Quit Facebook, pastor tells church officers

November 18, 2010 Leave a comment

Jewish World Review

By Peter Mucha

http://www.JewishWorldReview.com | (MCT) Add another temptation for the faithful to resist:

Facebook.

The world’s biggest social network can lead married people astray, says the head of the Living Word Christian Fellowship Church in Neptune, N.J.

So, in his Sunday sermon, the Rev. Cedric A. Miller will announce that married church leaders have to log out for good, or get kicked out.

This thinking runs counter to churches that are embracing social media to reach their flocks.

Although Pope Benedict XVI has warned that virtual friendships are poor substitutes for real ones, just this week the U.S. Conference of Catholic Bishops, meeting in Baltimore, was urged to use new media to reach the young.

“If the church is not on their mobile device, it doesn’t exist,” said Bishop Ronald Herzog of Alexandria, La.

The Dalai Lama tweets. His latest: “True compassion brings with it the dispelling of internal tensions, a state of calmness and serenity.”

Miller’s counseling work, however, has taught him that it’s not good to get too chummy with old friends.

It leads to infidelity and other problems.

“There’s a reason why your past is the past, and hopefully you have grown in the Lord, matured to not link up with a past that for many people is a Christless past,” he told the Asbury Park Press.

Miller’s wife, Kim, is also a pastor in the church, which has grown to more than 1,000 members since the couple started it in 1987.

Cedric Miller, who is declining further interviews, also said he was giving up his Facebook page — and no sign of one could be found Wednesday morning.

He’s not alone, though, judging from articles and blogs online that decry not just sexual temptations, but wasted time.

Muslims have mixed feelings, worrying about modesty and likenesses of Muhammad, even as Facebook is the social medium of choice is many Muslim countries, according to a Huffington Post piece earlier this year.

Some Christians even gave up Facebook for Lent.


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Chinese Supercomputer Likely to Prompt Unease in U.S.

October 28, 2010 1 comment

  • The Wall Street Journal
  • By DON CLARK

    A newly built supercomputer in China appears poised to take the world performance lead, another sign of the country’s growing technological prowess that is likely to set off alarms about U.S. competitiveness and national security.

    The system was designed by China’s National University of Defense Technology and is housed at the National Supercomputing Center in the city of Tianjin. It is part of a new breed that exploits graphics chips more commonly used in playing videogames—supplied by Nvidia Corp.—as well as standard microprocessors from Intel Corp.

    Supercomputers are massive machines that help tackle the toughest scientific problems, including simulating commercial products like new drugs as well as defense-related applications such as weapons design and breaking codes. The field has long been led by U.S. technology companies and national laboratories, which operate systems that have consistently topped lists of the fastest machines in the world.

    [cnvidia1028] NVIDIAThe Tianhe-1A Supercomputer, located at National Supercomputer Center in Tianjin, China, is one of the fastest supercomputers in the world.

    But Nvidia says the new system in Tianjin—which is being formally announced Thursday at an event in China—was able to reach 2.5 petaflops. That is a measure of calculating speed ordinarily translated into a thousand trillion operations per second. It is more than 40% higher than the mark set last June by a system called Jaguar at Oak Ridge National Laboratory that previously stood at No. 1 on a twice-yearly ranking of the 500 fastest supercomputers.

    “I don’t know of another system that is going to be anywhere near the performance and the power of this machine” in China, said Jack Dongarra, a supercomputer expert on the Oak Ridge research staff who is a professor at the University of Tennessee and recently inspected the system in Tianjin last week. “It is quite impressive.”

    The development was not altogether unexpected. China placed 24 systems in the so-called Top 500 supercomputer ranking last June; a system called Nebulae, for example, took second place that also used chips from Nvidia and Intel.

    Editors’ Deep Dive: Businesses Put Supercomputers to Work

    Access thousands of business sources not available on the free web. Learn More

    But Mr. Dongarra and other researchers said the machine should nevertheless serve as a wake-up call that China is threatening to take the lead in scientific computing—akin to a machine from Japan that took the No. 1 position early in the past decade and triggered increased U.S. investment in the field.

    “It’s definitely a game-changer in the high performance market,” said Mark Seager, chief technology officer for computing at Lawrence Livermore National Laboratory. “This is a phase transition, representative of the shift of economic competitiveness from the West to the East.”

    Nearly all components of the high-profile Japanese system, called the Earth Simulator, were created in Japan. By contrast, most of the Tianjin system relies on chips from Intel and Nvidia, which are both based in Santa Clara, Calif. So U.S. customers could presumably construct a system with similar performance, noted Horst Simon, deputy lab director at Lawrence Berkeley Lab.

    But Mr. Dongarra noted that communications chips inside the machine were proprietary and designed in China, and the country is also working on its own microprocessors.

    Moreover, while the Japanese system was a single machine, Tianjin is part of a multi-year strategy by China to develop a range of machines to create a dominant position in both military and commercial applications. “In that sense, I would say this is a much more important event than the Earth Simulator,” Mr. Simon said.

    The new supercomputer will be operated as an “open access” system, available to other countries outside of China to use for large scale scientific computation, said Ujesh Desai, an Nvidia vice president of product marketing.

    It reflects a major design shift to use graphics chips to help accelerate the number-crunching functions most often carried out by so-called x86 chips, which evolved from personal computers and have long dominated supercomputing. Advanced Micro Devices, which makes both graphics chips and x86 microprocessors, is another company besides Nvidia that is promoting the technology shift.

    Write to Don Clark at don.clark@wsj.com

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    The Independent Institute’s MyGovCost.org Gives Voters A Government Cost Calculator:

    October 26, 2010 Leave a comment

    100 Swan Way, Oakland, CA 94621-1428 • Phone: 510-632-1366 • Fax: 510-568-6040 • E-mail: info@independent.orgwww.independent.org
    FOR IMMEDIATE RELEASE Contact: Lindsay Boyd
    202.225.7722, lboyd@independent.org

    Voting on Nov. 2nd? Find Out How Much Is Really at Stake
    October 25, 2010— In 9 days, you will have the opportunity to walk into a voting booth and make a choice. The health of our economy and financial responsibility of our representatives in Congress are two of the largest concerns being addressed by candidates on both sides of the aisle. The Independent Institute’s latest initiative, MyGovCost.org, demonstrates that regardless of your level of participation in this process on November 2nd, it is important to be educated and informed.
    Prior to submitting that ballot, you should know- how much is Washington’s spending costing you?

    The Government Cost Calculator is a tool developed at MyGovCost.org that enables you, the voter, to receive a personalized report on what Washington’s spending is costing you and how much you’ll be liable for in the growing national debt. MyGovCost Director, Emily Skarbek, encourages voters to utilize the Calculator to become informed about what federal spending programs are really costing.  The calculator enables anyone to see how much of their tax dollar go towards funding specific programs so that voters can see what they are forgoing by voting for increased expenditures at the federal level.

    For instance, a recent college graduate making $40,000 per year will be expected to pay $734,783 in federal taxes, and even then the federal government deficit and debt will continue to skyrocket. Interestingly, as demonstrated by the Government Cost Calculator, that same individual could have earned $5,042,961 if allowed to privately invest those dollars instead. Those hoping to enter retirement are also being faced with a similarly gloomy financial forecast. At 70 years old, those who are expecting to keep their spending in order during their retirement years face an average of $1, 207 in monthly taxes if current spending trends continue.

    So, for those of you hoping to “make your vote count” on November 2nd, don’t go to the ballot box without first arming yourself with the facts. Use the Government Cost Calculator at MyGovCost.org to crunch the numbers with different scenarios depending on your stage in life. Break the spending down by projects. Most importantly, share your results with friends who want to be better informed about excessive federal spending on November 2nd.

    To schedule an interview with MyGovCost.org Director, Emily Skarbek, please contact Lindsay Boyd, Director of Communications, at 202.225.7722 or lboyd@independent.org.
    For More Information, please visit www.mygovcost.org. Also look for us on Twitter at www.twitter.com/my govcost and Facebook at www.facebook.com/mygovcost!

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    Facebook ‘accidentally’ outing its gay users to advertisers

    October 24, 2010 Leave a comment

    Facebook logo

    Facebook logo

    By Niall Firth
    Last updated at 6:32 PM on 22nd October 2010

    Facebook might be inadvertently outing its gay users to advertisers, according to a new study.

    Researchers have discovered that different targeted advertising is being sent to users’ accounts if they have described themselves as gay or straight.

    The discovery could mean that people who wish to keep their sexuality private may be sharing it with advertisers without their knowledge.

    The loophole is yet another example of a Facebook privacy breach after it emerged that millions of pieces of personal information were being shared without users’ consent after using popular apps.

    Tyler Clementi, a university student killed himself after classmates allegedly used a hidden camera to film a sex session before airing it on the internetTyler Clementi, a university student killed himself after classmates allegedly used a hidden camera to film a sex session before airing it on the internet. The newly-discovered loophole means that people who want to keep their sexuality secret could be outed

    A team from Microsoft and Germany’s Max Planck Institute created six fake profiles: two straight men, two straight women, a gay man and a lesbian. They wanted to see if Facebook targeted ads based on sexuality, and so the profiles were left otherwise completely the same.

    The team then monitored what ads each virtual user was sent over a period of a week.

    They found that the ads displayed on the gay man’s profile differed substantially from those on the straight one. Many of these adverts were not obviously adverts for services that only gay men would require, and half of them did not mention the word ‘gay’ in the text.

    The researchers say that this means people who click on the adverts from their Facebook profile will not know that they were targeted for that ad because of the sexual orientation and so by clicking through on the ad are effectively ‘outing’ themselves.

    This means that the advertising firms now know if they are gay even if this aspect of their profile has been hidden from public view.

    The researchers write in the paper: ‘The danger with such ads, unlike the gay bar ad where the target demographic is blatantly obvious, is that the user reading the ad text would have no idea that by clicking it he would reveal to the advertiser both his sexual-preference and a unique identifier (cookie, IP address, or email address if he signs up on the advertiser’s site).’

    The loophole means that any advertisers who collect data such as Facebook IDs could match a person’s sexual preference with their unique ID and their name.

    A Facebook spokesman said: ‘Our advertising guidelines prohibit advertisers from using user data collected from running an ad on Facebook, including information derived from targeting criteria.

    ‘For example, we explicitly prohibit them from associating that targeting detail with the data collected from the user in forms they fill out, applications they make, or other interactions on their site. We also require that targeting of ads based on a user attribute be directly relevant to the offer in the advertisement.

    ‘We take the privacy of our users very seriously and take immediate action when violations of these policies come to our attention. We don’t provide any personally identifiable information to advertisers and we recommend that people always exercise caution when filling out forms about themselves online.

    ‘We have no evidence that the advertisers mentioned in this study sought to collect information about people using Facebook, but we encourage people to report any advertisements that they suspect may be doing so.’

    Last week it emerged that vast amounts of data – including the names of individual members and their online ‘friends’ – were passed to internet advertising firms, with tens of millions of people thought to have been affected.

    The leaks were possible even when members had deliberately set their privacy options to the maximum secrecy levels.

    The practice violates Facebook’s own rules on data protection and will raise questions about the company’s ability to keep information about its members’ activities secure.

    Security experts warned that the details could be used – when combined with other publicly available information – to build up a detailed picture of an individual’s interests, friendship circle and lifestyle.

    Around 25 different advertising and data firms were receiving the information, an investigation by the Wall Street Journal found.

    It was passed to them by firms whose ‘apps’ – games and other features – operate on Facebook and not by the social networking site itself.

    Using the data allows advertisers to better target individuals with promotion for specific product.

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    Big Brother WILL snoop on your calls and clicks: Minead isters resurrect plan to log all communications

    October 22, 2010 Leave a comment

    Image representing Skype as depicted in CrunchBase

    Image via CrunchBase

    Friday, Oct 22 2010 6PM  GMT

    Big Brother WILL snoop on your calls and clicks: Ministers resurrect plan to log all communications

    By James Slack
    Last updated at 11:50 AM on 21st October 2010

    The plans men police and other public bodies would be able to find out when where and to whom a text or call was made (file picture)

    The plans men police and other public bodies would be able to find out when where and to whom a text or call was made (file picture)

    Hugely controversial ‘Big Brother’ plans to store details of every internet click, email and telephone call that we make are being revived by the Coalition, it emerged last night.

    Police, security services and other public bodies would be able to find out which websites a person had visited, and when, where and to whom a text or call was made.

    Security officials insist that monitoring communications data is vital in the fight against terrorism and serious organised crime.

    But the plan – which was kicked into the long grass by Labour amid a public outcry – will put the Government on a collision course with civil liberties groups.

    They argue it is a ‘snooper’s charter’ which will allow the state to spy on millions of innocent citizens.

    So far ministers have insisted they want to provide a ‘correction in favour of liberty’ when it comes to the powers required to protect the public.

    This is likely to include the scrapping or watering down of a raft of draconian laws introduced by the last government, such as so-called ‘Section 44’ stop and search without suspicion, and spying by Town Hall bureaucrats.

    But ministers have been persuaded of the case to give the police and security officials enhanced rights to access the public’s communications.

    Officials insist many terrorists no longer use traditional methods of communication, hatching plots in internet chatrooms or on social networking sites such as Facebook.

    They can also speak over the internet, using Skype, and communicate through online computer games.

    One official said communications data ‘provides evidence in court to secure convictions of those engaged in activities that cause serious harm’.

    It has played a role in every major Security Service counter-terrorism operation and in 95 per cent of all serious organised crime investigations in recent years, sources said.

    Firm plans will be published later this year on how the personal information – which does not include the contents of emails or text messages – should be stored.

    Crucially, one option that has been ruled out is holding it all on a huge central government database.

    The most likely scenario is that internet and telephone companies will be expected to store the details themselves. The authorities could then request access to the data as part of investigations.

    Read more: http://www.dailymail.co.uk/news/article-1322071/Government-track-email-website-visit-Big-Brother-WILL-snoop.html##ixzz136n646tL

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