MORE GALLEON RELATED INSIDER TRADING CASES
Roomey Kahn, the former Intel executive turned government informant who helps spur the Galleon inquiry at the outset continues to aid enforcement officials in developing insider trading cases. Now she is a key witness against her neighbor and friend, Douglas Whitman, president and managing member of hedge fund investment adviser Whitman Capital LLP.
Mr. Whitman has been charged in a criminal insider trading complaint with two counts of conspiracy to commit securities fraud and two counts of securities fraud. U.S. v. Whitman, 12-cr-00125 (S.D.N.Y.). He and his firm have also been charged in a civil insider trading complaint alleging violations of Securities Act Section 17(a) and Exchange Act Section 10(b). SEC v. Whitman, Case No. 12-cv-01055 (S.D.N.Y. Filed Feb. 10, 2012). Both cases are pending.
The criminal and civil complaints allege insider trading in the securities of Polycom, Inc. and Google Inc.. Each complaint details allegations which echo those of earlier Galleon related cases. First, in January 2006 Ms. Kahn obtained inside information about Polycom’s calculation of its revenues and other financial results for the fourth quarter of 2005 from Sunil Bhalla, a senior executive at the company. Ms. Kahn traded on the information and passed it to others including Mr. Whitman who traded through his firm. As a result of the trading Whitman Capital obtained illegal trading profits of more than $360,000.
Second, Ms. Kahn obtained inside information about Google’s up-coming financial results from Shammara Hussain, an employee of Market Street Partners. That firm is an investor relations advisor for Google. Specifically, in July 2007 Ms. Hussain provided Ms. Kahn with details regarding Google’s calculation of its earnings for the second quarter of 2007 prior to the public disclosure of the information. Whitman Capital used the information to trade and made over $620,000 in illicit profits.
The criminal complaint also alleges that Mr. Whitman traded in the securities of Marvel Technology Group, Ltd. based on inside information, a charge not included in the SEC action. From 2007 through 2009 Mr. Whitman and his firm bought and sold Marvell stock and options based on inside information regarding the earnings and revenue of the firm, as well as other business information. That information was furnished by Karl Motey, an independent research consultant who is alleged to have obtained it from several Marvel employees.
Ms. Kahn previously pleaded guilty to insider trading charges and was sentenced to a term of probation. She has been assisting enforcement officials. Ms. Hussain has been named as a defendant in an SEC civil suit. To date the SEC has charged 30 persons in connection with its Galleon related investigation. The investigations are continuing.