Expert network firms, currently the focus of a major US insider trading investigation, have never had to work too hard to find midlevel corporate executives willing to moonlight as paid consultants.
With consultants earning anywhere from $200 to $1,000 an hour for a meeting with hedge fund traders, working for an expert network firm - an intermediary company that matches industry consultants with hedge funds - is an easy way for an executive to pad his bank account.
The ongoing federal investigation is revealing that some high-demand consultants, especially ones willing to pass on confidential corporate information, were sometimes earning double their salaries by moonlighting with an expert network firm. Some of the consultants arrested so far in the investigation raked in as much as $200,000 in fees.
The high hourly fees paid by expert network firms to consultants, many of whom make only modest salaries at their full-time jobs, is raising questions about whether the potential to earn all this extra cash is what tempts some consultants to break the law and provide hedge funds with inside information.
"In a situation where somebody is making $200,000, that's clearly more than a little bit of outside work," said Jeff Morgan, president and chief executive of the National Investor Relations Institute in Washington. "Your average person may get enticed or sucked into this."
A case in point is Winifred Jiau, charged by federal prosecutors on December 29 with passing on confidential corporate information about two technology companies to a number of hedge fund traders and analysts.
Prosecutors in New York claim that Jiau, as a consultant with California-based expert network firm Primary Global Research, earned $200,000 in fees from hedge funds over a two-year period. That is on a par with the type of money she was making as an independent trader.
And many of her calls with hedge fund managers were brief. Prosecutors allege it took Jiau less than 4 minutes of her time to give a hedge fund manager the heads-up on what Marvell Technology Group would report as earnings for the second quarter of 2008.