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Insider-Trading Informant to Forfeit $40,000, Avoids Prison

Karl Motey, a technology consultant who has been praised by the government for his help in insider-trading investigations, avoided prison time.

NEW YORK -- Karl Motey, a technology consultant who has been praised by the government for his help in insider-trading investigations, avoided prison time at his sentencing on Monday.

U.S. District Judge Jed Rakoff in Manhattan ordered Motey to forfeit $40,000 and to serve a year of supervised release, for conspiracy and securities fraud. Rakoff called Motey "a particularly impressive cooperator."

Motey, 48, recorded more than 400 conversations with more than 50 subjects of the government's wide-ranging insider trading probe, according to sentencing papers filed by his attorneys. He continues to help authorities with ongoing investigations, the Manhattan U.S. Attorney's office said in a separate sentencing memorandum.

In 2005, the Wall Street Journal named Motey a top securities analyst in the semiconductor industry, and a year later he started the Coda Group research consulting company in Los Altos, California.

Starting in 2007, he has admitted, he began relaying confidential information about Marvell Technology Group Ltd and other companies. In the case of Marvell, Motey got the inside information from an employee at the company, according to prosecutors.

"The past three, four years have been the most shameful, difficult part of my life," Motey told the judge before he was sentenced. "I severely apologize for my mistakes."

Motey began cooperating with authorities soon after a Federal Bureau of Investigation agent stopped him on the street in April 2009. He pleaded guilty in 2010 to conspiracy and securities fraud.

His cooperation helped lead to more than 20 convictions of other defendants, according to prosecutors.

These include former hedge fund manager Doug Whitman, who was sentenced last month to two years in prison, and James Fleishman, a former sales representative with Primary Global Research, who was sentenced in 2011 to 2-1/2 years in prison.

Primary Global Research is one of several "expert network" firms, conduits between traders and former industry executives and other experts, that prosecutors have increasingly scrutinized.

Motey's assistance in the prosecutions "has been extraordinary," Manhattan U.S. Attorney Preet Bharara wrote in the government's sentencing papers.

Motey is one of several informants who have proven critical in the government's insider trading probe.

Roomy Khan, a former Intel Corp executive who helped authorities in their probe of now-imprisoned hedge fund manager Raj Rajaratnam, was sentenced last week to a year in prison for securities fraud, obstruction of justice and conspiracy.

Another cooperator, former hedge fund consultant Wesley Wang, was sentenced last month to two years probation after pleading guilty in July to two counts of conspiracy to commit securities fraud.

The case is U.S. v. Karl Motey, U.S. District Court, Southern District of New York, No. 10-1249.

Copyright 2010 by Reuters. All rights reserved.

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