By Dow Jones Business News, October 03, 2013, 10:15:00 AM EDT
Kevin Chang--the former Citigroup Inc. ( C ) research analyst whose alleged misconduct led to a $30 million fine for the
bank from the state of Massachusetts--emailed confidential information to employees of SAC Capital Advisors LP,
including some who worked in units at the heart of the insider-trading probe into the hedge fund firm, according to an
order filed by the state.
Mr. Chang allegedly provided confidential information about Hon Hai Precision Industry Co. Ltd. (2317.TW) in December
to SAC Capital and its CR Intrinsic Investors LLC and Sigma Capital Management LLC divisions. Mr. Chang also allegedly
sent the information to T. Rowe Price, Citadel and GLG Partners according to the secretary of the Commonwealth of
Massachusetts, William F. Galvin.
SAC was allegedly the first recipient of Mr. Chang's unpublished research, according to Mr. Galvin's consent order
against Citigroup. The firm didn't respond to a request for comment. Mr. Chang couldn't be reached for comment, and it
couldn't be determined if he had a lawyer.
According to a consent order, on Dec. 13 employees of SAC Capital LP along with its CR Intrinsic and Sigma Capital
divisions emailed Mr. Chang asking whether he would give them his thoughts on a competitor's downgrade of Hon Hai, a
major supplier of Apple iPhones.
The order says that on the morning of Dec. 13, Mr. Chang sent an SAC Capital employee unpublished research, including
his own Hon Hai projection numbers and his unpublished research containing Apple iPhone order forecasts. The new figures
represented a roughly 27% cut from Mr. Chang's Dec. 10 report on Hon Hai.
Mr. Chang--who on Sept. 4, 2013, was fired from Citi'sTaiwan unit according to the consent order--also allegedly sent
unpublished research to three other SAC employees who worked at the hedge fund.
SAC Capital-including its CR Intrinsic division--is involved in a massive insider trading criminal probe that resulted
in an indictment unveiled in a New York federal court on July 25. That indictment accused SAC of engaging in insider
trading "that was substantial, pervasive and on a scale without known precedent." Prosecutors accused SAC of allowing
multiple portfolio managers and analysts to obtain or trade on inside information on various stocks while employed
In a related civil action, prosecutors sought forfeiture of SAC's assets of roughly $10 billion. Both SAC and founder
Steven A. Cohen have denied wrongdoing. Mr. Cohen hasn't been criminally charged and hasn't been accused personally of
any wrongdoing. The Wall Street Journal has previously reported that SAC lawyers are working on presenting a settlement
offer to prosecutors.
Among other players, the insider trading probe on SAC involves a former employee of CR Intrinsic, Mathew Martoma, who
allegedly obtained confidential information about a drug trial. Mr. Martoma--who was released on $5 million bail--will
face a criminal insider-trading trial that is slated for November. He's pleaded not guilty.
Mr. Chang hasn't been accused of wrongdoing.
For its part, Citi admitted to the division's statement of acts but neither admitted nor denied any violations of law.
"We are pleased to have this matter resolved. We take our regulatory compliance requirements very seriously and train
all of our employees about these obligations. We are also constantly working to improve, manage and monitor the
compliance and controls process," said the bank in a statement.
Write to Saabira Chaudhuri at saabira.chaudhuriA@wsj.com
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