A California-based hedge fund manager was charged on Friday with making $900,000 illegally on inside information about three technology companies, the latest strand of the high-profile Galleon Group cases brought by the U.S. government against money managers and traders.
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The indictment unveiled in Manhattan federal court charges Doug Whitman of Whitman Capital of obtaining information on Google Inc and Polycom Inc from trader Roomy Khan, a one-time associate of Raj Rajaratnam, the Galleon hedge fund founder. Rajaratnam was convicted in a high-profile trial last May.
Investigators said Whitman also received inside information on Marvell Technology Group Ltd from Karl Motey, a trader and independent researcher who has pleaded guilty to a criminal charge and is awaiting sentencing.
The three companies have not been accused of any wrongdoing.
Federal prosecutors said Whitman made the illegal profit in trading between 2006 and 2009. The U.S. Securities and Exchange Commission filed related civil charges against Whitman, who it called a neighbor and friend of Khan.
Whitman's lawyer rejected the charges. "Mr. Whitman did not pay any insiders or provide any personal benefit to any insiders for inside information," the lawyer David Anderson, of Sidley Austin, said in a statement. Anderson said his client had cooperated with the government's investigation.
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Evidence provided by Khan about trades in Google and Polycom was used in the trial of Rajaratnam, who is serving an 11-year prison sentence.
Khan has pleaded guilty to a conspiracy charge. She has yet to be sentenced, and is seeking leniency for having cooperated.
Sanjay Wadhwa, associate director of the SEC's New York office, said in a statement: "This action should send a strong signal that the SEC will continue to pursue every angle of the Galleon investigation to hold accountable those who have undermined the integrity of our markets by engaging in illegal insider trading."
Whitman, 54, of Atherton, California, surrendered to FBI agents in New York, the FBI and U.S. prosecutors said. The criminal charges of securities fraud and conspiracy carry a combined possible maximum prison term of 25 years.
Whitman Capital in Menlo Park, California is a private partnership focused on the technology industry, according to the hedge fund's website.
Dozens of hedge fund managers, traders, consultants, lawyers and executives have been charged since 2009 in a sweep by federal authorities to stop money managers from gaining an illegal edge in the market with inside information.
The indictment released on Friday said in 2006 and 2007, Whitman obtained confidential earnings information and other business information from Khan about Polycom and Google.
In exchange, Whitman provided Khan with information about other publicly traded technology companies, the court document said.
From 2007 to 2009, Whitman bought and sold Marvell stock based on confidential earnings, revenue and other financial information provided by Motey. Whitman paid Motey through "a soft dollar payment arrangement," prosecutors said.
The case is USA v Doug Whitman in U.S. District Court for the Southern District of New York, No. 12-125.