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Authorities suspect an inside game on Wall Street

The government's case suggests insiders are generating illicit profits for Wall Street heavyweights at the expense of individual investors who don't have access to the same information.

November 25, 2010|By Walter Hamilton and Nathaniel Popper, Los Angeles Times

According to the complaint, the charges against Chu were built with the cooperation of Richard Choo-Beng Lee, an employee at a hedge fund not named in the filing, and who last year pleaded guilty to securities fraud in a separate case.

Chu promised to set up meetings for Lee in Taiwan with employees from Broadcom and Sierra Wireless Inc., a Canadian firm, the complaint alleges. When Lee asked Chu whether those consultants would provide numbers as good as those provided by an earlier Broadcom employee, the complaint says Chu told him, "All depends on the person … Some guys willing to talk, some are not."

The complaint indicates that Chu told Lee he was "nervous" about some of the transactions and expressed concern that their conversations might be recorded.

The complaint says an unidentified employee of a technology company participated in the conspiracy by providing Chu's clients with non-public information about the firm including sales and revenue numbers. The alleged co-conspirator received more than $200,000 for talking with Chu's clients, the government filing says.

Chu also connected hedge funds with employees of Atheros Communications Inc. in San Jose, according to the complaint.

Officials with Atheros, Sierra Wireless and Broadcom did not return calls for comment. ( Los Angeles Times publisher Eddy W. Hartenstein is on Broadcom's board of directors.)

On its website, Primary Global Research, says it can provide investors with access to "a world-class, global network of industry professionals, selectable by experience, perspective and location across eight industry sectors."

That network of experts, the website says, gives "institutional investors and analysts a strategic advantage when making investment decisions."

The site describes Chu as the firm's "bridge to Asia experts and data sources" and "just a fun person to travel with on the highways and byways of Taiwan."

A spokesman for Primary Global said the firm had "severed its relationship" with Chu but declined further comment. Jeffrey Plotkin, a lawyer representing Chu, also declined to comment.

Chu was arrested four days before he was scheduled to travel to Taiwan, the complaint says. If convicted, he could face up to 30 years in prison.walter.hamilton@latimes.com

nathaniel.popper@latimes.com

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