Let’s say it’s 2013. Preet Bharara is still the monster haunting the dreams of everyone on Wall Street, and now some of his guys and their accompanying FBI agents want to have a little chat. Something about a little Yahoo trading that you maybe did based on some black edge helpfully provided by your buddy. What do you do? Well, the first thing you do, obviously, is roll over on your friend and sell him out, which is exactly what Richard Lee did. But what do you do next? Do you just roll over and plead guilty yourself? After all, up to this point that Preet guy has a pretty good record of sending people like you up the river if you don’t play ball. Or do you say, hold on a minute: I don’t really remember things going down the way Preet’s people said they went down. Also, I’m a really rich hedge fund manager. Maybe I should check things out before copping a plea?
Richard Lee decided, back in 2013, that this was apparently too much trouble and raced to a judge to admit his guilt. In the last few years, however—notably as his sentencing looms—he’s been doing some thinking, checking through some old records, reliving the good times, like that time he got fired from Citadel after one day in a new job for ginning up the numbers to boost his bonus. And do you know what? It turns out that he made those Yahoo trades a full two hours before the buddy he sold out passed him the tips he thought he’d traded on. Amazing, huh? Can he not go to jail now?
Lee “labored under a significant misapprehension of the facts of his own case” and now wants a dismissal or else a trial date, his lawyer Gregory Morvillo wrote….
Lee said that during plea talks, he recalled buying Yahoo shares after learning at about 11:30 a.m. on July 10, 2009, from Collins Stewart analyst Sandeep Aggarwal, that the company was planning a partnership with Microsoft Corp that could challenge Google’s Internet search dominance.
But Lee said he now knows he did 97 percent of his buying earlier that morning, after learning that Collins Stewart had told clients about the planned partnership.
He said he had messaged Cohen about Collins Stewart’s view at 9:13 a.m. and gotten a related message from an SAC trader at 9:38 a.m.
Bharara’s successors at the Manhattan U.S. Attorney’s Office aren’t quite ready to give up on this one. For starters, if Lee bought 3% of the shares after Aggarwal spilled the beans, that’s still insider trading. For another, maybe Lee took Preet’s deal because he had done so much insider-trading that it seemed likely that he’d broken the law in this case, as well. After all, before his one-day stint as head of Citadel’s value special situations team, Lee had allegedly been a member of Citadel’s alleged “insider trading group.” Better to nip this thing in the bud a play along with the authorities, right? Take the easy route. And once the statute of limitations for all that other insider-trading passes, remember that he’d forgotten those exculpatory IMs.
Nah, they probably just slipped his mind and he decided not to pay any lawyers to do some discovery.