Hedge Fund Manager Found Guilty of Insider Trading

A former California-based hedge fund manager who took the stand in his own defense was convicted of insider trading on Monday.

After less than a day of deliberations, a federal jury found Doug Whitman of Whitman Capital in Menlo Park, Calif., guilty of earning about $1 million in illegal profits trading technology stocks, including Google and Polycom.

Mr. Whitman faces a maximum possible sentence of 50 years in prison, though he is expected to receive far less than that. His sentencing is set for Dec. 20.

“Douglas Whitman now joins the grim procession of convicted Wall Street professionals who decided that the rules don't apply to them,” Preet Bharara, the United States attorney in Manhattan, said in a statement. “The rules do apply. Over and over again, juries of good, common-sense citizens have said the rules do apply, and they have held defendants like Mr. Whitman accountable for breaking them.”

Of the more than 70 Wall Street traders an d corporate executives charged with insider trading by federal prosecutors in Manhattan over the last three years, virtually all have either pleaded guilty or been found guilty. Juries in Federal District Court in Manhattan have convicted all eight defendants who have taken their cases to trial.

Mr. Whitman, 54, fought the charges, arguing that all of his trades were made in good faith and grounded in legitimate stock research. The defense was similar to the one used by Raj Rajaratnam, the former hedge fund billionaire convicted by a jury last year. Mr. Rajaratnam was at the center of an vast insider trading web that ensnared Mr. Whitman.

Prosecutors in Mr. Whitman's case relied on the testimony of several main cooperating witnesses, including Roomy Khan, a former trader who was also at the center of Mr. Rajaratnam's trial. Jurors also heard secretly recorded telephone conversations that prosecutors said showed Mr. Whitman trafficking in confidential information.

In a rare tactic for an insider trading defendant, Mr. Whitman took the stand in his own defense. He testified that he never thought his sources possessed any secret information about the stocks that he traded.

Through a spokesman, David Anderson, Mr. Whitman's lawyer, declined to comment.