For one suspect, the surprise visit came outside the gym just after his morning workout. Another person got a visit while eating at a Subway. For a third, it happened as he sipped wine on his front porch.
In each instance the visitor was David Makol, an FBI agent based in New York who specializes in "flipping" people, or persuading them to gather evidence against their closest friends or business allies. Mr. Makol also played a key role in Wednesday's arrests of four investment-fund analysts or traders, and charges against three more—the latest developments in a sweeping insider-trading investigation that has shaken Wall Street over the past two years.
The government has secured 56 guilty pleas or convictions out of 63 people charged with insider trading since late 2009. Many of the investigations have relied on information gathered by witnesses Mr. Makol persuaded to join the government's side.
Mr. Makol's tactics typically involve approaching his subjects during their regular daily routines, according to people familiar with his methods. After collecting personal tidbits about his target—a wife's name, or how many packs of sugar he takes in his coffee—he tries to persuade the person that the government already knows so much that there is little choice but to cooperate.
According to one suspect approached by the agent, Mr. Makol told him, "I help guys like you. I put points up on the board for you" that could mean reduced jail time.
Mr. Makol, a 41-year-old former forensic accountant and son of a forklift driver, declined to be interviewed. Some of his methods are described in court documents related to the government's insider-trading cases.
In April 2009, Karl Motey, an independent stock researcher, had just finished his morning workout near his home in Mountain View, Calif., when Mr. Makol approached him in the gym parking lot, according to court filings and people close to the situation. Mr. Motey was in his workout clothes; the FBI agents wore suits and ties, according to a person close to the situation.
The men sat down in a nearby coffee shop to talk, and Mr. Makol flipped Mr. Motey almost immediately. According to a transcript from an insider-trading trial last year, Mr. Motey admitted in the coffee shop to passing inside information about two technology companies.
Within a week of his FBI coffee klatsch, Mr. Motey had traveled to New York to meet with prosecutors and FBI agents, according to court transcripts. He helped the government collect evidence used in Wednesday's arrests of some investment-fund employees, people familiar with the matter say.
In court testimony, Mr. Motey was asked about his post-workout encounter. "Is it fair to say you were afraid, based on what the agents confronted you with, on that date?"
"Yes," Mr. Motey said, according to a transcript.
Mr. Motey, who taped dozens of phone calls for the FBI and was labeled a government "operative" by defense lawyers, pleaded guilty to securities fraud and conspiracy to commit securities fraud in December and is awaiting sentencing. He testified last year that he hopes to get probation due to his cooperation.
Some defense lawyers on Wall Street have criticized the activities of the FBI and federal prosecutors in the probe, particularly the use of wiretaps, which are associated more often with organized-crime investigations than white-collar crime. "The danger in overbearing techniques is, it gets people to plead guilty when they really don't think they're guilty," said Andrew Frisch, a white-collar lawyer in Manhattan who isn't familiar with Mr. Makol. "That happens more frequently than people would be comfortable knowing."
An FBI spokesman declined to comment. The government has defended its use of wiretaps, saying they are needed to gather evidence in such complex cases.
Mr. Makol, a Longmeadow, Mass., native with a receding hairline and a somber expression, looks the part of a TV gumshoe. He previously worked as an examiner for the Securities and Exchange Commission, and joined the FBI's securities-fraud unit about a decade ago, a job that pays under $150,000 a year.
An avid runner and Boston sports fan, he is part of a Brooklyn-based FBI squad known as C-35. Along with a competing squad in Manhattan, it has played a role in the Galleon Group insider-trading case, which led to last May's conviction of hedge-fund titan Raj Rajaratnam.
Mr. Makol helped flip Galleon Group trader David Slaine, according to people close to the situation. Mr. Slaine wore a wire to gather evidence against a friend from Galleon, according to people familiar with the situation; the friend later pleaded guilty to securities fraud and conspiracy charges, according to documents. In a letter to a judge this month urging a lenient sentence, prosecutors called Mr. Slaine's cooperative efforts "nothing short of extraordinary."
Mr. Slaine pleaded guilty to securities fraud and conspiracy to commit securities fraud in a filing unsealed in 2010. He is awaiting sentencing.
In October 2010, Mr. Makol and another FBI agent urged technology researcher John Kinnucan to cooperate with the government's insider-trading investigation, according to people familiar with the matter. They approached him on his Portland, Ore., front porch as he sipped a glass of wine, according to Mr. Kinnucan, who described the encounter in an interview.
As he watched the two agents stop and get out of their car, Mr. Kinnucan said, he knew they weren't "from the 'hood" based on their suits. "Wow, what are they up to?" he recalled thinking.
When they walked over to him and asked, "Are you John Kinnucan?" he said he thought to himself: "This is not good."
Mr. Kinnucan, who denies any wrongdoing and has told the government he can't be of any help, said he invited the two agents into his kitchen. "They complimented me on my home," he recalled. He says he didn't offer the agents any wine and continued to sip his own. Mr. Makol told him "put down that wine while I'm talking to you," he recalled.
He says he soon realized that his wife and children were supposed to be home from school at any minute. He said he thinks the agents "chose that [timing] for maximum effect."
During the conversation, he said, the agents asked him for his help in the insider-trading investigations. The meeting ended, Mr. Kinnucan said, with the agents telling him they needed his answer within 48 hours or "there would be trouble."
Mr. Kinnucan hasn't been arrested or charged.
After the October 2010 meeting, Mr. Kinnucan sent an email to his clients in which he detailed how two "fresh-faced eager beavers" from the FBI had tried to persuade him to "wear a wire" to gather evidence against them.
As reported in The Wall Street Journal, Mr. Kinnucan this month allegedly threatened violence against Messrs. Makol and the second FBI agent, Edmund Rom, in voice-mail messages, according to people familiar with the matter.
The two FBI agents declined to comment. Mr. Kinnucan said in an email sent to the Journal that he made the calls to the agents "to force public exposure" of their "constitutional violations." He said his calls didn't threaten violence.
In May 2010, James Fleishman was about to eat lunch at a Subway in Mountain View, Calif., when Mr. Makol and another FBI agent approached him, according to transcripts in an insider-trading case. Mr. Fleishman was a sales executive at an "expert network"—a firm that arranged meetings between investors and employees of publicly traded firms who were moonlighting as consultants-for-hire.
When the agents approached, Mr. Fleishman told them he was a diabetic and needed to eat his sandwich before talking to them, according to a transcript from his trial.
The agents waited for Mr. Fleishman to eat the sandwich, according to the transcript.
Then they played recordings of his phone calls and offered him a "so-called way out," Mr. Fleishman's lawyer said at the trial, and said "he should wear a wire and go get the bad guys," according to the transcript.
Mr. Fleishman responded that people at his company weren't doing anything wrong, Mr. Makol's FBI partner testified.
Mr. Makol then told Mr. Fleishman that he "would be watching," and urged him to "think about his family," mentioning his daughter, Mr. Fleishman's lawyer said, according to the trial transcript.
Mr. Fleishman said he would think about it, that he needed to talk to his wife and would give them a call, according to the transcript. He never did.
In September 2011 he was convicted of conspiracy to commit securities fraud and conspiracy to commit wire fraud and has been sentenced to 2½ years in prison. Mr. Fleishman is appealing his conviction and his sentence, which he is scheduled to begin serving next month.
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