Indian American charged in biggest US insider-trading case

Wednesday, 12 January 2011 00:01 - - {{hitsCtrl.values.hits}}

Washington (IANS): US Federal regulators have charged the co-founder of a New York hedge fund and three others including an Indian American executive in what has been called the biggest insider-trading case in US history.

Sunil Bhalla, a former senior Indian American executive of tech company Polycom, was charged Monday with hedge fund Trivium Capital Management, its co-founder Robert Feinblatt, analyst Jeffrey Yokuty, and Shammara Hussain, an employee at a consulting firm that did work for Google.

In a civil case filed in a New York court, the Securities and Exchange Commission alleged Bhalla and Hussain provided confidential information to Feinblatt and Yokuty that enabled them to make about $15 million from trading on the information. So far the SEC has charged 27 people in the case.

“Today’s action reveals disturbingly corrupt arrangements – faithless company executives who secretly pass corporate information to hedge fund managers willing to violate the law for profit,” Robert D. Khuzami, the SEC’s Director of Enforcement, said in a statement.

Galleon’s Sri Lankan American founder, Raj Rajaratnam, has pleaded not guilty and has mounted an aggressive defence. Last year, his lawyers attacked the SEC’s case, notably its reliance on wiretaps obtained from federal criminal investigators.

The SEC said Feinblatt and Yokuty received material nonpublic information from Roomy Khan, a former Intel Corp. executive who pleaded guilty in the Galleon Group criminal case and is cooperating in the government’s continuing investigation.

In about 2003, the SEC said, Khan befriended Bhalla, a producer of networking applications for voice, video and data networking based in Pleasanton, California.

Bhalla in 2005 obtained advance information about sales and revenues for Polycom’s fourth quarter and passed that information to Khan, the SEC said. Khan earned about $330,000 in illicit profits, it said.

Khan later also gave information provided by Bhalla to Feinblatt and Yokuty about Polycom’s 2006 first-quarter earnings and to Rajaratnam, the SEC alleged.

Khan also passed on tips from Deep Shah, a former Moody’s Corp. analyst who was a friend and roommate of her cousin, the SEC alleged. At the time Moody’s was evaluating Hilton’s debt. Shah, who was named as a defendant in the criminal case, is a fugitive, prosecutors said.

The SEC seeks to bar Bhalla permanently from acting as an officer or director of a registered public company.