Prosecutor: Evidence vast in insider trading trial

A raft of evidence — including instant messages that refer to money as "sugar" and testimony about using lobsters as payoffs — proves that a California researcher was selling inside information to hedge fund managers, federal prosecutors told a Manhattan jury in closing arguments Thursday at the researcher's insider trading trial.

The coded instant message evidence against Winifred Jiau "showed she knew what she was doing was wrong," Assistant U.S. Attorney Avi Weitzman said at the first trial to result from a government crackdown of Wall Street middlemen suspected of peddling inside information as if it were legitimate research.

The expansive paper and electronic trail also exposed how the hedge fund managers made massive trades "within a few seconds of getting information from Winnie Jiau," the prosecutor said.

In her closing argument, defense attorney Joanna Hendon countered that one of the government's key witnesses, former portfolio manager Noah Freeman, was disdainful toward Jiau and dismissive of her tips.

"There's no evidence he ever took her information seriously enough to make a single trade of stock," Hendon said.

Hendon also highlighted defense evidence that she argued showed that another hedge manager-turned-cooperator made his trades based on research supplied by high-priced analysts rather than anything provided by Jiau.

"If Ms. Jiau's information was somehow the golden ticket, we wouldn't have the reams and reams of information from other sources," she said.

Jiau, 43, of Fremont, Calif., was among 13 people arrested last year on charges that she conspired to accept cash and gifts to feed inside information to hedge funds. Most of the other defendants have pleaded guilty.

The defendant worked for two years as a consultant for Primary Global Research, a Mountain View, Calif.-based company. Born in Taiwan, she is a U.S. citizen. She has remained jailed since her arrest, unable to make $500,000 bail.

Prosecutors allege Jiau earned more than $200,000 by selling "tomorrow's news today" about earnings and performance of publicly traded companies. The information, they say, was communicated in code with her co-defendants, sometimes using "cooks" to refer to tipsters, "recipe" for the inside information and "sugar" for what she was paid for it.

Freeman, who has pleaded guilty, testified that Jiau's tips over the years were "absolutely perfect" and "extremely" helpful, making $5 million to $10 million in illegal profits from trades on a single technology company.

He said he rewarded Jiau with $5,000 a month, and sent her an iPhone, a dozen lobsters and a $300 gift certificate to a clothing boutique. She later insisted they cancel the gift certificate and make it for a restaurant near her home.

Prosecutors backed up the testimony by unveiling an email in which Freeman instructed his secretary to ship the lobsters to Jiau.

"I know you hate her, but we have to do this," Freeman wrote. The secretary wrote back: "Sure thing, I hope she gets sick from the lobsters."

The jury was expected to begin deliberations Friday.