Apple and RIM Data Are at the Center of This Insider Trading Case

A former AT&T (NYSE:T) executive pleaded guilty on Monday to having leaked information like Apple (NASDAQ:AAPL) iPhone and Research in Motion (NASDAQ:RIMM) BlackBerry sales numbers to hedge fund operators who made illegal trades using the information.

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Alnoor Ebrahim, who the Wall Street Journal described as the former director of channel marketing and sales operations for AT&T Mobility’s wireless group, admitted to having worked as a consultant for “expert-network” group Primary Global Research LLC, sharing private corporate information with the firm between 2008 and 2010. Ebrahim was paid about $180,000 for his “insight.”

“I knew that what I was doing was wrong,” Ebrahim confessed. “I knew I breached my fiduciary duty to AT&T.” Ebrahim entered a guilty plea to one count of conspiracy to commit securities fraud and wire fraud.

Ebrahim was caught as part of an FBI probe into PGR sales manager James Fleishman, who is currently appealing a two-and-a-half year sentence over conspiracy charges. Ebrahim’s guilty plea is the latest development in an ongoing government crusade against insider trading and “expert-network” rings, an illegal system in which firms like PGR charge a fee to connect hedge fund managers and other traders with industry experts, like Ebrahim, who have access to private corporate information. Former Goldman Sachs (NYSE:GS) and Procter & Gamble (NYSE:PG) board member Rajat Gupta was found guilty of similar charges on Friday.

Ebrahim was caught on tape dispensing sensitive information to Karl Motey, a former independent financial consultant who pleaded guilty to similar insider trading charges in December 2010. Motey also testified at the Fleishman trial and has cooperated with the government, lending to its investigation. During the recorded 2009 phone call, Ebrahim confirms to Motey that AT&T was on pace to sell 2.2 million iPhones in the fourth quarter. In January 2010, AT&T reported that it had activated 3.1 million iPhone 3GS handsets in the fourth quarter of 2009.

Testifying in the Fleishman trial,Gary Duffy, Ebrahim’s former boss and AT&T Director of Product Marketing, outlined the damage a lead of this nature could have on a telecom:

“Well, it’s harmful if the companies that we kind of partner with, like a RIM or an iPhone, if they don’t believe that the information that we’re sharing together to bring a device to market, if they don’t believe that that is going to be held in confidence and that we are going to release information jointly and at an agreed upon time, then my sense is they’re going to be very apprehensive to want to launch really important, cool devices with us.”

The expert-network case is ongoing. So far, 63 of the 69 suspects charged have pleaded guilty or been convicted of their respective charges. Ebrahim is scheduled to receive his sentence on October 25.

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