[ by Howard Haykin ] Federal investigators are moving from the corporate office of Manhattan to the west coast and into the clubby world of retired baseball players in California.  They're trying to uncover the next insider trading ring.  An ongoing insider trading investigation in L.A. is focusing on a retired, well-known baseball player and several other former athletes whose names have not yet been disclosed, said two people familiar with the situation. Currently, authorities are targeting a group of former professional baseball players, who allegedly are part of what one government official described as "a loose federation of people" sharing important market-moving information about various companies before it becomes public. Continuation of Sweeping Probe That Nabbed Rajaratnam. It would appear that federal investigators are utilizing the popular phrase, "Six Degrees of Separation," to effectively root out participants in insider trading schemes.  After all, the current investigation is part of the same sweeping federal probe that led to the conviction of dozens of hedge fund managers and traders, including Galleon founder Raj Rajaratnam, along with their tippees. The probe has also taken investigators to San Francisco, where they are looking into a Goldman Sachs investment banker suspected of providing tips about healthcare deals to a Galleon employee.  But people familiar with the roughly 3-year-old investigation of the ballplayers, conducted by federal prosecutors and the SEC, say it's possible that not everyone will be charged, criminally or civilly.  These sources who did not provide their identities, pointed out that federal prosecutors in L.A. have moved more slowly than their counterparts in New York, in part because prosecutors in California have less experience with insider trading cases. Identities Remain Undisclosed. The sources did not identify any of the ballplayers under scrutiny nor the teams they once played for because no one has been charged with wrongdoing.  Still, the investigation is an indication that U.S probes into insider trading are far from over and are not confined simply to rooting out bad actors in the $2 trillion hedge fund industry.  If anything, this other phase of the insider trading investigation shows the extent to which the trading on corporate secrets has gone beyond traditional Wall Street firms.  It's become a "massive web of underground tunnels we're digging up." Philadelphia - Main Hub for SEC Market Abuse Unit. It's reported that the enforcement action taking place in California springs from numerous subpoenas sent out by SEC's Philadelphia regional office in November 2009, just a few weeks after Rajaratnam was arrested.  The subpoenas, which went to dozens of hedge funds and other firms, focused mainly on a number of pharmaceutical companies that had been acquired in corporate buyouts, such as Merck's takeover of Schering-Plough in 2009. Other healthcare deals that the SEC inquired about were Eli Lilly & Co.'s buyout of ImClone Systems in 2008 and the 2007 takeover of Genesis HealthCare Corp. by a pair of private equity funds. The SEC's Philadelphia office is the main hub for the regulator's market abuse unit, which uses special market monitoring techniques to look for insider trading networks.  A potential sign of things to come in California came last August when the Philadelphia office charged former California Angels third baseman Doug DeCinces with insider trading.  In that case, filed in federal court in Santa Ana, CA, regulators charged DeCinces, his physical therapist, and 2 friends with trading shares of Advanced Medical Optics, a healthcare company, based on non-public information. The 4men settled with the SEC and agreed to fines, with DeCinces paying $2.5 million.  A criminal probe remains open, but no charges have been filed so far against any of the men.  DeCinces's lawyer did not respond to a request for comment.  The civil charges against DeCinces are not directly related to the investigation involving the larger group of former athletes.  But the people familiar with the situation said the DeCinces charges developed during the investigation. Meanwhile, the involvement of U.S. prosecutors in California in the investigations came into focus on 4/19/12 during a pre-trial hearing in insider trading trial of former Goldman Sachs director Rajat Gupta, now on trial in Manhattan.  During a discussion at the proceeding, participating attorneys and the presiding judge revealed that federal prosecutors in California were investigating a Goldman Sachs investment banker for allegedly passing on tips about corporate health care deals. The banker was later identified as Matthew Korenberg, an SF-based Goldman banker who continues to work for the investment company and has not been charged with any wrongdoing.  The prosecutors in L.A. are investigating whether Korenberg tipped off Paul Yook, a one-time Galleon healthcare analyst, about Abbott Laboratories' takeover of Advanced Medical Optics in 2009, according to a transcript of the pre-trial proceeding in the Gupta case. The Advanced Medical Optics deal was the same buyout that DeCinces allegedly was tipped on. But in this instance, the tipper, according to the SEC, was an employee of Advanced Medical Optics. In the SEC complaint against DeCinces, there was no mention of any tip coming from a Goldman Sachs investment banker. The SEC's Philadelphia office in going after insider trading has been focusing on irregular trading patterns in specific stock and specific corporate buyouts, such as the Advanced Medical Optics deal. Foul Tips - Several Goldman Employees. Korenberg is at least the 3rd Goldman employee to surface in the federal government's far-reaching investigation insider trading. But Korenberg is the only one who remains an employee of the Wall Street bank. The firm supports Korenberg and had this to say after his name surfaced in media reports:

"We have been aware of these allegations for more than two years, investigated them, fully cooperated with federal authorities in the matter, and Matt Korenberg remains actively employed by the firm."

His lawyer, John Hueston, also has taken issue with federal prosecutors in California.  Our view is that this is a long-dormant investigation that has gone nowhere," said Mr. Hueston, a partner at Irell & Manella in L.A.  "It should be a terminated case." Yook, who now lives in Honolulu, did not respond to requests for a comment.  His lawyer, Lindi Beaudreault, also did not respond to a request for a comment. One reason no charges have been filed against Korenberg and Yook, said some of the people familiar with the California phase of the investigation, is that the evidence is weak.  For instance, people familiar with the case note that the California prosecutors are working without evidence gathers from telephone wiretaps, which proved in the Rajaratnam case.  That's one reason some suggest charges will not be brought against all of the professional athletes involved in the probe. The California phase of the investigation is moving forward largely without the benefit of wiretaps on phones, a key investigatory tool that proved crucial in securing the May 2011 conviction of Rajaratnam. For further details, go to:  [Reuters, 6/7/12].