Glg Cuomo

AN OPEN LETTER TO NEW YORK ATTORNEY GENERAL ANDREW CUOMO August 17, 2009 DEAR MR. CUOMO: I would like to introduce you to Pete Richichi. Mr. Richichi is the Chief Operating Officer at Wynit Distribution, one of the country's largest distributors of consumer electronics. Wynit distributes myriad products. Most notably, Wynit is a major distributor of GPS location device made by the company Garmin (GRMN). In fact, Wynit is one of the two largest distributors of these products at present with a wide range of customers including some of the largest consumer electronics chains as well as e-commerce companies and independent retailers. Why should this concern you? Because Mr. Richichi is also a very active consultant working at the Gerson Lehrman Group (GLG). He's listed as among their Top 5% of contributors, which means that GLG's hedge fund analyst clients like him very much indeed. GLG is a so-called "expert network". You likely know what an expert network is (since your predecessor Elliot Spitzer had started investigations into several expert networks and the U.S. Senate has demanded investigations of GLG's role in helping doctors communicate what was alleged to be inside information to hedge fund analysts). But for the masses I'll explain. An expert network is an informal group of industry experts who work as ad-hoc paid consultants. The consultants function as an on-call answer service for large hedge funds and other Wall Street investors. If an analyst at a multi-billion dollar hedge fund wants to find out how a particular Garmin SKU is selling or perhaps when a new Garmin product will be launched, they contact their Gerson Lehrman Representative who, in turns, calls Mr. Richichi. Naturally, such consultants are paid very well for their services. I'd wager Mr. Richichi is clearing $400 to $500 per hour for his services. For those sorts of prices, the information had better be good. And as someone who formerly spoke with expert network consultants on a regular basis in a past life, I can assure you the information is extremely good. So good that it often constitutes information not yet in the public realm, information that can play a key role in determining whether to buy or sell a security. Is this insider information? I would not be able to make such a legal distinction. But consider the following case. In its latest quarterly report, Garmin announced unexpectedly strong earnings numbers, causing shares to spike nearly 20% in a

day. A discussion with Mr Richichi could easily have helped to illuminate strong sales for Garmin than expected, as his company handles millions and millions of dollars worth of Garmin wholesale sales. Would this type of information have been interesting to hedge fund managers? Would being able to receive these types of information have constituted "insider trading"? That's for a lawyer and a judge to determine. Consider this, however. If a hedge fund manager had levered up on Garmin shares in anticipation of good news that the public did not yet have, his fund could likely have made their annual trading targets in a single afternoon. Retail investors and others who cannot afford the $100,000 annual subscription fees to access GLG's network could have made a similar bet but would not have had access to critical information from key Garmin distributors. An equally interesting question is whether Mr. Richichi has the permission of his company CEO and, more importantly, of Garmin, to enter into private discussions with hedge fund managers on any topic relating to GPS devices. GLG claims that every single one of its consultants has the approval of their parent company. If this is true, then documentation of such approvals must be on file somewhere including signatures from supervisors. Obviously, self-reporting that your boss is OK with snitching on the secrets of your best customers is probably insufficient proof of approval, particularly when many of the GLG consultants are being paid 20x multiples of their standard hourly rates to consult with GLG's hedge fund clients. Mr Cuomo, it's time to start asking some very hard questions about expert networks. With the SEC still reluctant to enforce anything against anyone, it has fallen on your office to provide justice to the small investors, to level the playing field. As a number of economic studies have shown, information assymetries can undermine stock markets and result in a critical loss of confidence and trust. Expert networks are a key mechanism to augment information assymetries, giving even more information to the hedge fund managers who already control so many of the cards on Wall Street. Please look closely at GLG, Vista, Coleman, GuidePoint Global, and LinkedIn (which just entered the expert network business via a partnership). Ask them the hard questions that should have been asked before this cancer was allowed to grow on the already mottled face of Wall Street. Thank you for reading. Sincerely, Hedgehog's Repent