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Insider trading suspect: Are his threats ominous?

Insider trading case leads to arrest of suspect. Federal prosecutors say he should stay jailed because he threatened them during the insider trading investigation.

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U.S. Attorney Preet Bharara said Kinnucan used financial incentives and fancy meals among other inducements to obtain company secrets.

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"He allegedly made a business model out of passing off those secrets to his hedge fund clients was legitimate research," Bharara said.

Janice K. Fedarcyk, assistant director-in-charge of the FBI's New York field office, criticized Kinnucan, saying: "That kind of information beats research every time. The only problem is it isn't legal."

Kinnucan is accused of obtaining inside information about earnings reports from companies such as F5 Networks Inc., Sandisk and Flextronics International Ltd. between 2008 and 2010 and relaying the numbers to his clients.

Kinnucan faces separate civil charges that were announced simultaneously by the Securities and Exchange Commission. The SEC says he was tipped off in July 2010 that a Seattle-based technology company was poised to report strong quarterly earnings. He passed the information to clients, who profited $1.6 million from illegal trades, the SEC's complaint alleges.

"Obtaining important and unreported financial results from company insiders and selling that information to hedge funds is not legitimate expert networking services — it's old-fashioned insider trading," SEC enforcement chief Robert Khuzami said in a statement.

Kinnucan's tipsters included employees of at least five publicly traded companies, the SEC said. It said he compensated them with cash, meals, ski trips and other vacations.

The SEC wants Kinnucan to return money it alleges he was paid for illegal tips, as well as any insider-trading profits generated by him or his clients. It also is seeking unspecified civil monetary penalties.

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