EXCLUSIVE - Email of analyst visited by FBI went to big players

NEW YORK/BOSTON Fri Dec 3, 2010 3:11am IST

A street sign is seen on Wall Street outside the New York Stock Exchange York January 18, 2008.  REUTERS/Brendan McDermid/Files

A street sign is seen on Wall Street outside the New York Stock Exchange York January 18, 2008.

Credit: Reuters/Brendan McDermid/Files

Related Topics

NEW YORK/BOSTON (Reuters) - Money manager Ameriprise Financial would seem to have little in common with closely held investment advisory firms like Friess Associates and Sonar Capital Management or a giant hedge fund like Citadel Group.

Yet a Portland, Oregon-based technology analyst under scrutiny in a U.S. insider trading probe included employees of all three firms in an unusual email he sent in late October, according to information reviewed by Reuters.

The research analyst, John Kinnucan, told an eclectic list of industry contacts that two agents with the Federal Bureau of Investigation had recently visited him in connection with the investigation.

In the email, sent to more than 50 people associated with some 20 hedge funds and mutual funds, Kinnucan said he had rebuffed a demand by the FBI that he cooperate with the inquiry and secretly record conversations with a client, said people familiar with the situation.

The names of many of the recipients of the email were disclosed to Reuters by a source who had a copy of the email. They were confirmed by another person who also has seen a copy of the email.

The email, first reported by the Wall Street Journal on Nov. 19, has elevated Kinnucan, the principal of Broadband Research, a small independent research firm, into something of a minor celebrity in financial circles and suggests that federal authorities believe the misuse of confidential information is widespread on Wall Street.

Over the past two weeks, Kinnucan, who did not return phone calls, has appeared on television channel CNBC and penned an essay for The New York Times' Dealbook blog to explain why he refused to "wear a wire." In his Dealbook op-ed piece, Kinnucan accused federal authorities of seeking to "criminalize what has been common practice for years."

JUDGMENT AT ISSUE

Kinnucan's email, which included the names of industry contacts and their company email addresses, has unnerved many on Wall Street. There is a fear that by simply being a recipient on the email, federal authorities may take notice and come visit these contacts too.

Employees of Ameriprise, Delaware-based Friess Associates and Boston-based Sonar Capital and MFS Investment Management, were some of the recipients of the Kinnucan email. Some of the better-known hedge funds -- Coatue Management, Citadel, SAC Capital Advisors and Maverick Capital -- also employ analysts and traders who received the email.

Officials for a few of the funds said that Kinnucan, in disclosing the identity of his clients, may have violated an expectation of privacy that traders and analysts had when they signed up with him. One person, who did not want to be identified, said Kinnucan may not have "exercised the best judgment" in identifying his contacts on the email.

An spokesman for Minneapolis-based Ameriprise, which sells insurance but has been expanding its advisory and wealth management business, did not return a phone call seeking comment. One of the Ameriprise portfolio managers who received the email said, "I'm sorry, I can't comment."

An official with Friess Associates also declined to comment. The founder of Sonar Capital did not return phone calls. A lawyer for Coatue also did not return phone calls.

CONTACTS WORRIED

Over the past two few weeks, a handful of Kinnucan's current or former clients, including SAC Capital and mutual funds Janus Capital Group and Wellington Management, have received either subpoenas or requests for information from federal prosecutors, according to investor letters or public statements by the funds. People familiar with the situation said Citadel also received a subpoena from U.S. authorities.

Another former Kinnucan client, David Ganek's Level Global Trading, had its office raided by the FBI on Nov. 22.

Level Global has told its investors the fund is not the "target" of the investigation. Janus on Thursday issued a statement saying it too is not a "target" of the investigation. Wellington and SAC Capital have told investors they are cooperating with the information requests. A Citadel spokeswoman declined to comment.

A person familiar with Maverick said the hedge fund had not received a subpoena. An MFS spokesman said no one at the firm or any employee has been contacted by the government.

Federal authorities have declined to comment on the investigation. But representatives for some of Kinnucan's industry contacts who have not yet been served with subpoenas privately said they are worried.

In some cases, the Kinnucan email was sent to several people at a firm or fund. For instance, eight people at Ameriprise received the email and at Citadel there were seven recipients, sources said.

Kinnucan sent his email to at least three people at Level Global, one of three hedge funds raided by the FBI. One of the recipients was Anthony Chiasson, one of the fund's founding partners and a director of research.

(Additional reporting by Ross Kerber; Editing by Steve Orlofsky)

FILED UNDER:

INTERNAL SECURITY

REUTERS SHOWCASE

Setback For Sahara

Setback For Sahara

Supreme Court defers verdict on Sahara plea to raise more debt on hotels  Full Article 

SpiceJet Crisis

SpiceJet Crisis

SpiceJet says fleet grounded on lack of fuel  Full Article 

Drug Patents

Drug Patents

Novartis sues Cipla over respiratory drug Onbrez   Full Article 

Boost for Tata Steel

Boost for Tata Steel

Tata Steel restarts key iron mines amid shortage  Full Article 

Reuters Poll

Reuters Poll

BSE Sensex to hit 32,980 by December 2015  Full Article 

India Outlook

India Outlook

ADB trims growth forecasts for developing Asia, says India to grow 5.5 pct in 2014  Full Article 

Real Estate

Real Estate

HDFC to raise $500 mln real estate private equity fund - sources  Full Article 

Banking Sector

Banking Sector

Japan banks to bulk up India presence on improving ties   Full Article 

U.S. Spending Bill

U.S. Spending Bill

Obama signs bill $1.1 trillion government spending bill  Full Article 

Reuters India Mobile

Reuters India Mobile

Get the latest news on the go. Visit Reuters India on your mobile device  Full Coverage