Ex-Level Global Manager Sentenced to More Than 6 Years

During the sentencing of the former hedge fund manager Anthony Chiasson on Monday, Judge Richard J. Sullivan marveled at his prodigious wealth, ticking off the annual income listed on his tax returns. “$16 million, $10 million, $23 million,” he said.

“It’s hard to imagine why someone would risk all that to engage in a crime like this,” the judge said.

The crime is insider trading, and Judge Sullivan handed down one of the stiffest sentences yet in the government’s vast campaign to root out the illicit activity on Wall Street trading floors. He sentenced Mr. Chiasson, the co-founder of Level Global Investors, to six and a half years in prison after a jury found him guilty last December of illegally trading technology stocks.

“This kind of conduct can’t go unpunished,” Judge Sullivan of Federal District Court in Manhattan said.

Mr. Chiasson, 39, who did not address the court, was ordered to pay a
$5 million fine and forfeit illegally obtained proceeds of as much as
$2 million. He must report to the Federal Bureau of Prisons in 90 days.

His legal team, led by Reid H. Weingarten of Steptoe & Johnson and Gregory Morvillo of Morvillo Law, is appealing his conviction. They have brought on Mark F. Pomerantz, a lawyer at Paul, Weiss, Rifkind, Wharton & Garrison, to handle the appeal.

Mr. Chiasson was tried last year alongside Todd Newman, a former portfolio manager at Diamondback Capital Management. The government accused them of being the two most-senior Wall Street traders in an eight-member “criminal club” that made $72 million in profits by trading shares of Dell and Nvidia based on corporate secrets obtained from inside those companies.

After a six-week trial, a jury convicted Mr. Chiasson and Mr. Newman.
Earlier this month, Judge Sullivan sentenced Mr. Newman to four and a half years in prison.

The sentencing of Mr. Chiasson caps an ignominious end to a once-highflying Wall Street career.

As a young technology-industry analyst in his mid-20s, Mr. Chiasson joined SAC Capital Advisors, the giant hedge fund owned by the billionaire stock picker Steven A. Cohen. Working under David Ganek, one of Mr. Cohen’s star traders, Mr. Chiasson made a name for himself making a large, negative bet against Internet stocks just before the dot-com bubble burst.

He also met his wife at SAC. Sandra Janson worked as an assistant controller at the fund, and according to a court filing, their relationship started when Mr. Chiasson wandered into her office and playfully complained about the candy selection in a dish she kept on her desk.

“The next time Anthony visited the accounting department, the dish contained tiny, single-serving boxes of Junior Mints â€" Anthony’s favorite candy,” Mr. Chiasson’s lawyers wrote. The couple lives in Manhattan with their young son and baby girl, but they are moving to the suburbs.

“I’m so sorry for your family and I’m so sorry for your wife,” Judge Sullivan said.

A decade ago, Mr. Chiasson left SAC along with Mr. Ganek to start Level Global Investors. The firm flourished, attracting marquee investors like Aetna and Cornell University. At it peak, the firm managed $4.2 billion and had 75 employees. In April 2010, Goldman Sachs bought a minority stake in the fund.

Just a few months later, Level Global’s ascent came to a crashing halt when F.B.I. agents raided its offices. The government investigation into Level Global came as part of an inquiry into hedge funds’ use of expert network firms, which are research shops that connect money managers to public company employees.

Mr. Chiasson became ensnared in the case after a junior analyst at Level Global, Sam Adondakis, turned state’s evidence. He told investigators - and later testified at trial - that he shared with Mr.
Chiasson secret information gleaned from a source inside Dell.

Lawyers for Mr. Chiasson had some success in arguing that their client should receive a sentence lower than the one recommended under federal guidelines, which was for as much as 10 years.

The guideline sentence was so stiff because the government said that Mr. Chiasson caused Level Global to earn about $40 million in profits as a result of the improper trades, and the profit amount primarily drives the guideline amount. Mr. Chiasson’s lawyers said that adhering to the guidelines “would be as draconian as it would be unwarranted.”

Judge Sullivan, though, disparaged one aspect of the defense’s argument that Mr. Chiasson should receive a lenient sentence because he lived an otherwise honorable life beside the crimes for which he was convicted - an argument commonly made by insider-trading defendants.

Mr. Morvillo described Mr. Chiasson as “an extraordinary man,” almost entirely focusing on his becoming a trustee while only in his 30s at both his secondary school, Cheverus High School in Portland, Me., and alma mater, Babson College in Wellesley, Mass. After Mr. Morvillo suggested that those appointments had nothing to do with money, Judge Sullivan cut him off.

“You think money had nothing to do with it?” the judge asked, referring to the trusteeships. “Do I have to suspend my disbelief this much?”

Mr. Chiasson’s case is one of several insider-trading prosecutions that have touched SAC, which has become a central target of the government’s investigation. Prosecutors charged two former SAC employees with participating in the insider-trading ring involving Mr. Chiasson. Jon Horvath, a former SAC technology stock analyst, has admitted to being a part of the scheme. In March, Mr. Horvath’s boss, Michael S. Steinberg, was indicted. He is fighting the charges and is scheduled to go on trial in November.

Mr. Ganek was not charged as part of the case, either criminally or civilly. But he figured prominently at the trial because he executed some of the questionable Dell trades. Although Mr. Adondakis testified that he did not tell Mr. Ganek about the source inside Dell, Judge Sullivan deemed Mr. Ganek an un-indicted co-conspirator in the case.

Federal prosecutors took an aggressive stance toward Mr. Ganek in their court papers connected to Mr. Chiasson’s sentencing.

“The evidence demonstrated that Mr. Ganek was aware that Adondakis’s information on Dell came from a source inside the company, and Ganek was a coconspirator with Chiasson,” prosecutors wrote. “That evidence included a number of instant messages and e-mails between Ganek and others that indicated that Ganek was kept comprised of Adondakis’s updates and the source of the information.”

John K. Carroll, a lawyer for Mr. Ganek at Skadden, Arps, Slate, Meagher & Flom, blasted the prosecutors’ comments about his client.

“The government’s conclusory statements about my client are unsubstantiated and unfair,” Mr. Carroll said. “It’s particularly unfair that prosecutors continue to defame my client with patched-together innuendo when they well know that they have comprehensively investigated his conduct and concluded that no charges should be brought.”