The government might have bordered on entrapment when it was investigating insider trading at Primary Global.In the middle of its investigation into the insider trading it believes is taking place between expert networks like Primary Global and their clients (hedge fund investors), the government attempted to get expert consultants on tape divulging insider information by tricking them.
Of course it’s only entrapment if the consultants wouldn’t have otherwise given Motey insider information.
But the government asked Karl Motey, an investment consultant and cooperating witness for the government, to call Primary Global consultants and induce them to divulge insider information, according to the Wall Street Journal.
Motey, who used to work for Deutsche Bank and Wachovia Securities, was a Primary Global client. So he had access to whichever consultant he wanted. And he could keep probing them until they said something illegal.
The government instructed Mr. Motey to contact Primary Global, beginning in May 2009, and to attempt to obtain inside information from its consultants… Those calls by Mr. Motey were recorded.
It’s unclear whether Motey was able to get anyone to divulge anything illegal on those calls. But it’s possible that it did, because the government seems to have used Motey in this way to build a case in order to get court approval for wiretaps on 11 “targets.” And it must have worked.
The Wall Street Journal got their information from a court filing made by the lawyer working for a Primary Global employee, James Fleishman. Fleishman’s lawyer, Ethan Balogue, is trying to block the government’s use of the wiretaps by saying that they were unnecessary. Balogue reportedly argues in the filing that the wiretaps were unnecessary because Motey could have called the consultants at any time and gotten them to say what the government wanted.
Of course it’s only entrapment if the consultants wouldn’t have otherwise given Motey insider information, and if they didn’t say anything else on tape once the wiretaps were approved, but hey, for those 11 “targets,” it’s a defence.