Expert network firms are at the heart of the fed's ongoing insider-trading investigation because they connect investment bankers, analysts, hedge-fund traders, mutual-fund traders and others to current and former managers from hundreds of companies.  Which brings us to Credit Suisse and Morgan Stanley.

Both firms formed alliances - formal partnership agreements, according to the WSJournal - with Gerson Lehrman Group, the nation's largest "expert-network" firm, going back to 2008.  In fact, Credit Suisse Group, recently received a subpoena seeking information and documents related to its use of experts at Gerson.

Those alliances boosted access by the banks and their clients to Gerson's network of doctors, technology firm employees and thousands of other experts;  and some of the banks' researchers and analysts, in turn, were made available to consult with Gerson clients.  As part of its deal with Gerson, Credit Suisse reportedly bars banking analysts from talking with consultants who are employees of publicly traded companies, or who have left publicly traded companies within the past 6 months. 

    Other Relationships on Wall Street.   Events of the past few week has led a number of Wall Street firms to examine their relationships with Gerson and other expert networks in light of the insider-trading investigation, and some clients reportedly have decreased their use of the networks.

  FBI agents questioned a consultant for Gerson in August as part of the probe - the consultant works for Marvell Technology Group, and provided information about the technology industry to a Gerson hedge-fund client - i.e., Diamondback Capital Management LLC. Last month, prosecutors charged an employee of Primary Global Research LLC, another expert-network firm, with providing inside information to a hedge-fund trader.

In 2008, Swiss bank UBS AG bought a buying a minority stake in Integrity Research Associates, a New York firm that tracks expert networks. UBS, which reportedly owns a 20% stake in Integrity, did so in part to help it compete with Goldman's Hudson Street and other research providers.  Integrity links investors to expert networks and other specialized research providers, earning fees for its advice. There's no suggestion that Integrity Research is being scrutinized in the insider-trading probe, and a UBS spokesperson declined to comment.  

    The Goldman Connection.   Other big Wall Street firms have had their own involvement with expert-network firms.  For example, the Goldman Sachs Group, through its Hudson Street Services unit, owns 16% of Epocrates Inc., a medical-technology provider that also runs an expert network of doctors and medical specialists.  There's no suggestion that Epocrates is being scrutinized in the current insider-trading investigation.

Goldman's stake in California-based Epocrates is one of several stakes that Hudson Street has bought in third-party research firms since 2007. Other stakes have included a technology firm that helps hedge funds manage investment research, and a research firm whose analysts do "channel checks" on consumer electronics, helping investment clients gauge the prospects for new products or how existing products are selling.  Epocrates filed a registration statement in July with the SEC to go public.  The scrutiny over expert networks isn't affecting the timing of the public offering, an Epocrates spokesman says.

Goldman also launched its own expert-network in 2007, called Vantage Marketplace, as a wholly-owned subsidiary.  Goldman did so to sell more specialized research to clients, and to win more of their trading business in the process.  Goldman closed the Vantage business last year - partly because it failed to attract enough clients in the difficult market. 

Needless to say, each of these Wall Street relationships gives the firms an added vested interest in the outcome of the fed's ever-growing probe.  Stay tuned - more is sure to come out.  For further details, click onto:   [WSJournal, 12/8, Two Large Banks Tied to Gerson, ..."]