Newman, Todd - Former Diamondback Mgr Gets 54 M...
Former Diamondback Manager Todd Newman Gets 54 Months in Prison - Forbes
Todd Newman Leaving Courthouse After Sentencing - PHOTO by Rick Maiman
Prison Walter Pavlo Contributor
Last December, both Todd Newman (48) and Anthony Chiasson (40) were convicted of trading on insider information gained from leaks on financial information on Dell and Nvidia from late 2007 until 2009. The prosecution of Newman gained momentum after the November 2010 raid of hedge funds Diamondback Capital (Newman) and Level Global Investors (Chiasson). Today Newman received a prison term of 54 months in prison from U.S. District Judge Richard Sullivan, who acknowledged Newman by saying, “I realize this is a difficult day for you and your family.” Prosecutors had wanted 78 months … so the sentence was 2 years “less difficult” for Newman and the family. Chiasson is set to sentenced by Judge Sullivan on May 13.
Newman started as a portfolio manager at Diamondback in March 2006 where he cut his teeth on a $50 million trading limit. In September 2007, Newman expanded his analyst staff and hired Jesse Tortora, who would change his fortunes. Tortora had a number of contacts in the financial industry and used them to obtain confidential earnings information on high tech companies like Dell Computers. The inside information flowed from a Dell employee (Rob Ray) to an analyst and former Dell employee (Sandeep “Sandy” Goyal) to Tortora, then on to Newman for the trade. Tortora was the man with the connections. When Tortora left Diamondback in April 2010, so did the hot tips that Newman had been receiving … a few months later, Diamondback was raided, Newman was suspended and then later resigned. Tortora has been cooperating with the Feds from early on in the investigation.
As he awaits prison, Newman will spend his last days of freedom with his 12 year old daughter and his ex-wife, Jill, as they all still live together. Life is always complicated for the condemned white-collar defendant. In fact, his ex-wife wrote a letter to Judge Sullivan requesting leniency and added, “Todd does not drink, smoke, abuse prescription drugs, take illegal drugs, or gamble.” Hard to believe he even worked on Wall Street!
Newman has appealed his guilty verdict on the grounds that he was not aware that the information he ultimately received originated with a corporate insider who disclosed it in exchange for personal benefit… something the jury was never told. These are legal matters, but something that is not in dispute is that Newman has had a positive influence on a number of people, despite his shortcomings. Many provided letters of support to the judge with hopes of gaining a more favorable (fewer years in prison) outcome. My favorite was from a carpenter in Amagansett, NY. In addressing Judge Sullivan of behalf of Newman he wrote:
“Let me stress that as a carpenter, I know nothing about Wall Street, or hedge funds, or derivatives, or swaps, or any of those dark subjects. Every time that I have ever invested money in the stock market, I’ve lost. I would have been better off going to Las Vegas — at least that way, they would have given me a nice tour of Hoover Dam before taking all my money. I am, sadly, one of those antiquated people who makes his living form the sweat of his brow. What Todd [Newman] may or may not have done is beyond my understanding. What I do know is how devoted Todd is to his child. Many times I have joined them in the backyard to throw the football, or the Frisbee. I’ve joined them for dinners out, and I see the respect and good manners with which Todd’s daughter treats the waiter or waitress. That knowledge of how to treat people well doesn’t come from nowhere – it’s handed down from one generation of decent people to the next. Of course, all fathers love their children. If I am fortunate enough to have kids of my own some day, I can only hope that I will be as good a dad to my kids as Todd is to his.”
While it was a powerful letter, Judge Sullivan felt that some prison time was needed to teach Newman, and the rest of us, a lesson … “good guys go to prison too.” Todd Newman has 60 days to report to federal prison.