For 12 years, Nelson Obus, a hedge fund manager accused of insider trading, has been waiting — and waiting — to defend himself.
On Tuesday, Mr. Obus, who was first subpoenaed by the Securities and Exchange Commission in 2002, finally got his chance to explain his side of the story to a jury. During nearly six hours of testimony, Mr. Obus told a federal jury in Manhattan that he had not used confidential information to buy shares in a company that he knew would soon be sold.
“My father was very concerned with insider trading, and he passed that on to me,” Mr. Obus, whose father was a retail stockbroker, said in court on Tuesday. “He felt that the capital markets were a way for people to fulfill their dreams.”
Mr. Obus, who is at the center of one of the S.E.C.’s longest-running insider trading cases, could have made the case go away long ago. The agency brought the lawsuit against him in 2006, and Mr. Obus, who is 67, could have afforded any settlement. The agency does not have any criminal jurisdiction, so he would be subject only to civil penalties if found liable.
The profit that regulators say he reaped from an insider tip — $1.3 million — is less than one percent of the roughly $300 million his firm, Wynnefield Partners, has under management. Instead, Mr. Obus has spent more than $9 million on legal fees so far. If he loses, he could pay the S.E.C. $5 million more.
For Mr. Obus, who testified that he had about $30 million of his own money invested with Wynnefield, it is not about the money. It is about clearing his name.
A federal judge even sided with Mr. Obus in 2010, ruling that the commission had failed to provide sufficient evidence, but the S.E.C. won on appeal in 2012.
Judge George B. Daniels, who dismissed the case against Mr. Obus in 2010, is presiding over the trial.
Wearing an orange tie and a light blue shirt, Mr. Obus appeared relaxed during his first full day of testimony, at times even joking with an S.E.C. lawyer, although the two men came close to bickering over small details. At one point, the lawyer for the government insisted on bringing a calculator over to Mr. Obus so that he could compute a trade himself, even as Mr. Obus protested “I trust you!” more than once.
Mr. Obus, who also answered questions from his own lawyer, Joel M. Cohen, testified briefly on Friday, and he will take the stand again on Wednesday. The jury is expected to begin deliberating this week.
Certain facts about the case are not in dispute. In summer 2001, Wynnefield Capital bought 287,200 shares of SunSource, a Philadelphia seller of industrial products in which Wynnefield had long been an investor. A few weeks later, Allied Capital said it would buy SunSource, and the stock price nearly doubled.
Before the deal closed, however, Peter F. Black, an employee at Wynnefield, got a call from his friend Thomas B. Strickland, who goes by Brad. Mr. Strickland was an associate at General Electric, which had a robust lending operation and was interested in financing the acquisition.
Mr. Black told Mr. Obus that Mr. Strickland had questions about SunSource’s management, and it is here that the accounts of what happened next begin to differ. According to the S.E.C., Mr. Obus soon called the chief executive at SunSource to say that “a little birdie” had told him that the company could soon be sold.
But Mr. Obus remembers things differently. On Tuesday, Mr. Obus told prosecutors that he had simply been concerned about a separate financing arrangement SunSource was considering, one that he thought would hurt shareholders.
When Wynnefield received a subpoena about a year later, Mr. Black got another call from Mr. Strickland, who pushed for the two men to meet. According to the S.E.C., Mr. Obus told Mr. Black that Mr. Strickland could “save himself,” implying that the two friends could get their stories aligned.
Mr. Obus said he encouraged just the opposite, even as all three men are now on trial.
“One saves himself by telling the truth,” he said on Tuesday.