A FORMER investor relations firm employee who did work for Google Inc. (NASDAQ: GOOG) is among 4 people charged by the US Securities and Exchange Commission (SEC) in connection with the Galleon insider trading case.
Shammara Hussain, 25, who worked at IR firm Market Street Partners was charged along with Robert Feinblatt, 41, co-founder and principal of New York-based hedge fund Trivium Capital Management LLC, Trivium analyst Jeffrey Yokuty, 37, and former Polycom (NASDAQ: PLCM) senior executive Sunil Bhalla, 54.
“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,” said Robert Khuzami, Director of the SEC’s Division of Enforcement. “Market participants need to understand that by engaging in such behavior they invite SEC scrutiny, and we will uncover their conduct and take aggressive action.”
The SEC alleges that Hussain was working at Market Street in San Francisco in 2007 when she tipped Florida-based individual investor Roomy Khan, 52 with inside information about Google’s 2007 second-quarter earnings. Market Street was working for Google at the time and the firm still lists the search giant as a client.
Khan, a former Intel Corp (NASDAQ:INTC) employee who has pleaded guilty to criminal charges in the Galleon case and is a cooperating witness, traded on the information and also tipped Feinblatt and Yokuty, who traded on behalf of Trivium based on the inside information, the SEC alleges.
Trading in parents’ account
The SEC alleges that Hussain, of Fremont, California, also passed the Google tip to hedge fund manager Choo-Beng Lee, 54, of San Jose, California, who along with his business partner, Ali T. Far, traded on the information through Far & Lee LLC. Lee also allegedly traded in his personal account based on the information.
After receiving the Google tip from Hussain, Khan traded on the inside information, and passed it along to Feinblatt, Yokuty, and others, including Thomas Hardin, a former Managing Director at New York-based hedge fund investment adviser Lanexa Management, LLC . Feinblatt and Yokuty traded on behalf of Trivium based on the information, and Hardin traded on behalf of Lanexa based on the information, and also passed the tip to his friend Gautham Shankar, a proprietary trader at New York-based broker-dealer Schottenfeld Group LLC, who traded on the tip.
The SEC claims Khan also passed the Google tip to Raj Rajaratnam, the founder of Galleon Management LP, who allegedly traded on behalf of Galleon based on the information. Rajaratnam has been free on bail after being charged criminally and civilly in October 2009. He pleaded not guilty and is to go on trial on Feb. 28.
Finally, Hussain is alleged to have traded on inside information she received from Kahn about the impending acquisition of Kronos by private equity firm Hellman & Friedman. Hussain’s alleged illegal trading was conducted in an account held by her parents in which she regularly traded.
The SEC has now charged 27 defendants in its SEC v. Galleon case that has alleged widespread and repeated insider trading at numerous hedge funds including Galleon — a multi-billion dollar New York hedge fund complex founded and controlled by Raj Rajaratnam — and by other professional traders in the securities of 14 companies generating illicit profits totaling approximately $69 million.
Hussain was fired in September 2007 after her employers discovered her blogging about client companies or competitors without disclosing her affiliations. Her posts were frequently linked by PaidContent and she was a contributor to Seeking Alpha. She now earns a living as an online marketing consultant.
The SEC’s full complaint is here (PDF)