Fund founder convicted in insider case

A San Francisco hedge fund founder was convicted of insider trading charges Monday in New York by a jury that rejected his claims that he was careful never to trade based on secrets he received about public companies.

Doug Whitman, whose hedge fund oversaw roughly $100 million, was convicted of all charges against him. Only days earlier the Manhattan federal jury heard him testify that he took pains to trade only on legal information gleaned from employees at public companies.

Whitman, 54, founder of Whitman Capital, was the only defendant to testify among dozens charged in a wide-ranging crackdown since 2007 on insider trading by federal authorities. Nearly all of those charged have pleaded guilty or been convicted at trial.

"Douglas Whitman now joins the grim procession of convicted Wall Street professionals who decided that the rules don't apply to them. The rules do apply," U.S. Attorney Preet Bharara said in a statement issued after the verdict.

Whitman's defense team declined to comment.

Prosecutors said Whitman made nearly $1 million between 2006 and 2009 by receiving inside tips about the earnings of public companies.

He testified that he was careful not to make trades based on inside information whenever he came across it, but his definition of what constituted secrets seemed elusive.

Whitman said he believed it was fair for public company employees to give traders general information or "color" about how business was going, as long as they didn't give up exact numbers about revenue, profits and guidance before they were released publicly.

Over three weeks, jurors heard testimony that Whitman's hedge fund made trades from 2007 to 2009 based on inside information related to Google Inc., Marvell Technology Group Ltd. and Polycom Inc.

Whitman was convicted of two counts of securities fraud and two counts of conspiracy to commit securities fraud. The charges carry a potential penalty of up to 50 years in prison, but his sentence will likely be much less. Sentencing was set for Dec. 20.