Former Wall Street hedge fund manager David Slaine pleaded guilty last December to charges of insider trading that reaped profits of $3 million, U.S. prosecutors said on Tuesday.
Slaine, who was identified in a court document on Tuesday as a cooperator in the separate, high-profile Galleon hedge fund insider trading case, admitted to conspiracy and securities fraud charges over trades he made in 2002 from tips provided by a former UBS Securities LLC executive.
The criminal charges announced by the Manhattan U.S. Attorney mirrored a civil complaint filed earlier in the day by the U.S. Securities and Exchange Commission. Prosecutors said he pleaded guilty on December 18 last year but they did not make the information public until Tuesday.
Slaine's attorney, Stephen Kaufman, could not immediately be reached for comment.
Slaine, 50, formerly of DSJ International Resources Ltd, or Chelsey Capital of New York, used the confidential information to trade ahead of UBS analyst recommendations, the SEC said in a civil securities fraud complaint filed in Manhattan federal court.
He faces a possible maximum sentence of 25 years in prison when he is sentenced on June 25 on the criminal charges.
Slaine was cited in a legal brief as a government cooperator by one of a score of defendants in the high-profile Galleon hedge fund insider trading probe.
The brief, by an attorney for indicted former trader Zvi Goffer, referred to a January 26 phone call with the SEC to explore the failure of the SEC to have produced any consensual recordings, cooperation agreements, reports of interview or other material relevant to government cooperators Gautham Shankar and David Slaine in the large productions made by the SEC.
Shankar, a one-time proprietary trader at Schottenfeld in New York where Goffer also worked, pleaded guilty on October 20 last year to fraud charges in the insider trading conspiracy. Goffer pleaded not guilty to an indictment on Tuesday.
Tuesday's SEC complaint said Mitchel Guttenberg, a 44-year-old former UBS executive who is serving a 78-month prison sentence following conviction on criminal charges of insider trading, tipped a Chelsey analyst Erik Franklin, who tipped Slaine.
It said that in 2002, Slaine made more than 20 trades in his personal account based on the UBS tips, reaping $500,000 in illegal profits.
Slaine knew that Franklin had a source at UBS who provided Franklin this material, nonpublic information, the SEC said. Slaine knew, or should have known, that this information was being tipped in a breach of duty to UBS.
The complaint said Franklin, 40, was a portfolio manager at Q Capital Investment Partners LP, Lyford Cay Capital and Chelsey Capital between 2001 and 2007.
Franklin tipped confidential information concerning upcoming UBS analyst recommendations to Slaine and another Chelsey manager, the lawsuit said. It did not identify the other manager.
The case is SEC v David Slaine, U.S. District Court for the Southern District of New York, No. 10-754.
(Editing by Robert MacMillan, Tim Dobbyn and Steve Orlofsky)