Wall Street Journal Material
December 16th 2010
Santa Clara, California
It was just after 6am. From my bed I checked my phone again for news of arrests. I’d been in a half-awake state for the past hour. A couple days before, a company co-founder had told me today would be The Day. He’d heard from a “reliable source” that today would be Round Two in the insider trading arrests that had rocked my company, PGR, these past few weeks.
I was anxious to see this investigation unravel so we could assess the damage and try and recover from the bomb that had been dropped on us the month before. The first arrest had been an employee of ours who’d worked mostly from Taiwan and had been recorded giving out financial numbers for a semiconductor company before they reported earnings. With this news, not surprisingly, clients had begun to flee and we were still seeing fallout. We were confident the next round of arrests would not involve PGR and would allow us to begin to distance ourselves from the investigation. It was our hope that we could rebuild credibility after enduring the damage inflicted by this one, rogue employee.
I took some guilty pleasure in imagining who would get an early morning wake-up call from the FBI today. Two of my clients had already had their offices raided recently by the FBI and several more had been subpoenaed for information. So, I had some ideas about whose name would soon appear in a breaking news story I’d squint to read on my 4” screen in the darkened bedroom. I wasn’t sure who they were coming after and didn’t really care. I was just glad it wasn’t me. I’d been through enough.
It had been seven months since my Subway encounter with FBI agent David Makol, famous for flipping suspects. However, I did not flip. I got a lawyer. The following week, on my lawyer’s first call with the prosecutor in New York, my lawyer asked, “Is Mr. Fleishman a target of the investigation?”
“No,” Assistant US Attorney Reed Brodsky answered from his office in New York. A year later, Brodsky would win a conviction in the trial of billionaire Galleon hedge-fund manager Raj Rajaratnam and put him in prison for eleven years, the longest insider trading sentence ever.
After I had choked down my sandwich at Subway, the agents had explained that I would be arrested. So what had changed? “Agents can lie,” my lawyer explained, “but prosecutors can’t.”
Now that they’d made their arrest of PGR’s Taiwan Country Manager Don Chu, it appeared they were done with my company and it helped explain why they had approached me in May. They were hoping I could help them to expand the investigation.
In the days after Brodsky told my lawyer I was not a target, my lawyer and I had several hours of discussions on a phone that his office had sent me via FedEx. A week after my Subway encounter, I came into my lawyer’s office for a half day. He and his associate pored over my emails and other documents from my company laptop. “Shouldn’t I be worried?” I asked. “I mean, these guys flew out from New York to lunch with me, right?”
“Sorry James,” he said with a smile as he put his hand on my shoulder, “but you’re not exactly Wall Street Journal material.”
“Then what are they up to?”
“Fishing,” he said matter-of-factly. “They had a hunch about your company and were hoping you’d lead them to something,” he said. “You’re a sales guy, right?”
“Well, the FBI has to prospect for a new opportunities as well.”
“So the whole thing was just a massive bluff?”
“Not quite. This business you’re in. This expert network business. It’s rife with legal liability. Connecting hedge fund guys with consultants at publicly traded companies? It’s like giving a kid the keys to your car, a 12-pack of beer and saying ‘Drive safe!’ But they don’t want you. They want your bosses. They want your clients. They have a theory about what’s going on but don’t have any real hard evidence. That’s where you were supposed to come in.”
Around 6:40am I woke back up, reached over the side of the bed and retrieved my iPhone from the space between the bed frame and the mattress. I did another search of the news. Still nothing turned up. I tapped out a two-word email to the PGR co-founder who’d told me about the arrests. “Any news?” I asked before drifting off to sleep.
Thirty minutes later: “BOOM! BOOM! BOOM!” The pounding at the front door pulled me up out of bed. It was too loud. It was too early in the morning for it to be anything but the absolute worst. The next arrest would not appear on my iPhone but was waiting for me outside my own front door.
I guess prosecutors can lie too.
Only two agents could fit on my doorstep and another four stood behind them on the patio. No guns were drawn but all were outfitted in blue, bulletproof vests looking ready for combat. “Mr. Fleishman, we have a warrant for your arrest and need to enter your home.” I stood there stunned, in my pajamas. The world as I knew it had just shifted into something impossible and horrible. I hadn’t yet put in my contact lenses so the agents’ faces were a nightmarish smear.
The FBI entered my home. I turned around and let them put on the handcuffs. My wife called from the bedroom wanting to know what was happening as our two-year-old daughter slept beside her. “The FBI are here,” I said, smiling slightly for some odd reason. “I’m being arrested,” I said, then stole a line I’d learned from Tony Soprano when he was in the same position: “Don’t worry honey; I’ll be home later today.”
Next they sat me down on my couch and took off the handcuffs so I could get dressed and be driven to the federal courthouse in San Jose for a 9:30am appearance.
The agents were actually very polite and respectful. They knew I had diabetes and wanted to be sure I took any food or medication with me to jail. But their manners didn’t blunt the terror and shock that had shattered my morning.
Every step I made was monitored by agents, as I put in my contact lenses and got dressed. I couldn’t call my lawyer, so I grabbed my phone and found his number for my wife. I saw I had a missed call from the PGR co-founder.
I would spend the next eight hours in shackles and handcuffs, shuffling between holding cells, the court room and the client-lawyer conference room where I would speak to my lawyer, who was sorting out bail with Brodsky. Bail was initially set at one million, but my lawyer got it down to $700,000.
Around 2pm, shortly after being released from my cell and shackles, I was sitting at a table on the first floor of the federal courthouse with my wife, a close friend and my lawyer, waiting to go through the pre-trial services interview. Through the windows, I could see camera crews and reporters milling about outside awaiting my departure. Before leaving the building, I had to disclose extensive financial, residential and work history as part of my new life under the watch of the government. Pre-trial services essentially operated like a probation office to ensure I did not jump bail.
On the table in front of my wife was my iPhone. I grabbed it and hungrily started retrieving and responding to the texts and emails from the day. I scanned through the stories about my arrest on CNN, Reuters, the New York Times, the Wall Street Journal and elsewhere. A Bloomberg story mentioned I’d been put on unpaid leave. I checked my email and corroborated this with an email from PGR’s CFO.
Scrolling through messages, I was so happy to be back in control of my communication stream. It had only been half a day, but it seemed much longer. I had a sick feeling as I looked at my slick touch-screen device. I knew I could be facing years without my family and all the privileges associated with freedom.
After my exit from the courthouse was documented by a moving swarm of lenses, I got into my lawyer’s BMW and he drove me home.
We sat parked along the curb in front of my home. He explained how difficult the next two years would be for me and how I had some very big decisions to make in the next month or two. If I pled guilty and cooperated with the government, I might be able to limit the legal fees to about $100,000. However, there would most likely be restitution and my salary from the last few years would be viewed as ill-gotten gains. But he thought I had a decent chance at getting probation or a very short sentence. “Sorry James, but you’ll likely lose everything you’ve made over the past four years.” It was clear that he was recommending I take a deal. I should plead guilty to a crime I didn’t commit, forfeit over a half a million dollars and then hope to retain my freedom.
“But you still believe me right? You know I didn’t help any clients get inside information?” I asked, staring out the passenger window at our home wondering if we’d lose it.
“Right,” he said, “I know. And sadly, it hardly even matters. Fighting this will bankrupt you and likely put you in prison for at least a few years, if not five. The Feds almost always win. Nine times out of ten. Are those odds you’re willing to face with your family in the balance? Either way, you’ll need a good lawyer. And I’d love to continue to represent you, but my firm would charge a minimum two million to take this to trial. I will find someone you can afford.” His fee was $800 an hour and PGR had been paying him since my encounter with the FBI. But those days were clearly over.
He had to cut his bad-news sermon short because a media van had just pulled up and was parking on the other side of our driveway. I should get into my house, he advised, before the camera guy could get set up. I went into my empty home and closed the blinds. I called my wife and I told her not to come home for a while. Looking around the house, I felt like we’d been robbed that morning.