Manhattan U.S. Attorney and FBI Assistant Director in Charge Announce Insider Trading Charges Against Oregon-Based Research Consultant

The following allegations are based on the complaint unsealed today in Manhattan federal court:

From 2008 through 2010, KINNUCAN obtained Inside Information, such as quarterly revenue numbers, from co-conspirators who were employed at publicly traded companies (the “Public Company Sources”), such as F5 Networks, Inc. (“F5”), Sandisk Corporation (“Sandisk”) and Flextronics International, Ltd. (“Flextronics”).

In order to develop and maintain a network of Public Company Sources, KINNUCAN befriended public company employees and offered to provide certain Public Company Sources with consulting fees and/or other non-monetary consideration. As outlined in the complaint, Kinnucan paid one of his sources approximately $27,500 for Inside Information, and invested $25,000 in the business of another source.

After he obtained Inside Information from Public Company Sources, KINNUCAN provided that Inside Information to BBR Clients understanding that they would use the information to execute securities transactions. For example, in June 2010 and early July 2010, KINNUCAN repeatedly sought information about F5’s quarterly financial results for the quarter ending on June 30, 2010 from an F5 employee. In a telephone call on July 2, 2010, at approximately 9:46 a.m., KINNUCAN informed the F5 employee that the revenue guidance F5 previously provided was $220 million. The F5 employee then told KINNUCAN that the unadjusted revenue number was “$232 million,” confirming that F5 would beat Wall Street’s consensus estimates. Within minutes of the July 2, 2010 conversation with the F5 employee, KINNUCAN called numerous BBR Clients to provide them with the F5 Inside Information. After receiving the F5 Inside Information from KINNUCAN, at least two BBR Clients executed securities transactions in F5 based, in whole or in part, on KINNUCAN’s Inside Information, earning profits and avoiding losses of more than $1.5 million.

In order to attract and retain BBR Clients, and in an effort to hide the true identity of his Public Company Sources, KINNUCAN lied to existing and prospective BBR Clients about the sources of his Inside Information, including by falsely stating that none of his sources was employed at a public company and that he did not pay his sources.