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U.S. Securities and Exchange Commission

Litigation Release No. 21834 / February 1, 2011

SEC v. Galleon Management, LP, et al., Civil Action No. 09-CV-8811 (SDNY) (JSR)

SEC Obtains Consent Orders and Final Judgments as to Defendants Robert Moffat and Mark Kurland, and Dismisses Action as to New Castle Funds LLC

The SEC announced that the Honorable Jed S. Rakoff, United States District Judge, United States District Court for the Southern District of New York, entered a Consent Order and Final Judgment as to Robert Moffat on February 1, 2011, and, on January 31, 2011, entered a Consent Order and Final Judgment as to Mark Kurland and a Stipulation and Order of dismissal as to New Castle Funds LLC, in the SEC's insider trading case, SEC v. Galleon Management, LP, et al., 09-CV-8811 (SDNY) (JSR). The SEC filed its action on October 16, 2009, against Raj Rajaratnam Galleon Management, LP, Danielle Chiesi, Moffat, Kurland, and others, alleging a widespread and repeated insider trading scheme involving hedge funds, industry professionals, and corporate insiders. When the SEC's complaint was filed, Moffat was Senior Vice President and Group Executive of IBM's Systems and Technology Group. Kurland was Chief Executive Officer of New Castle, which was a registered investment adviser based in White Plains, New York, that advised several hedge funds and, as of April 2009, had assets under management of over $970 million. Chiesi was a portfolio manager at New Castle, and she reported to Kurland.

The SEC alleged that Moffat tipped Chiesi, a close personal friend, to material nonpublic information about (i) Sun Microsystems, Inc.'s quarterly earnings for its second quarter, (ii) IBM's fiscal quarters ending December 2008 and March 2009, and (iii) pending transactions concerning Advanced Micro Devices, Inc. Moffat had learned of the inside information by virtue of his senior position at IBM. Chiesi traded in funds advised by New Castle on the basis of the inside information. Chiesi also tipped others, including Kurland, who also traded on the basis of the inside information. Chiesi also was tipped inside information about Akamai Technologies, Inc.'s earnings for its second quarter from an Akamai executive who was a family friend of Chiesi's. Chiesi and Kurland traded in New Castle funds based on this information. The SEC charged Moffat, Kurland, and New Castle, among others, with violations of Section 10(b) of the Securities Exchange Act of 1934 ("Exchange Act") and Rule 10b-5 thereunder, and further charged Kurland and New Castle with violations of Section 17(a) of the Securities Act of 1933 ("Securities Act").

The Consent Order and Final Judgment entered against Moffat: (1) permanently enjoins him from violations of Section 10(b) of the Exchange Act and Exchange Act Rule 10b-5; and (2) permanently bars him from acting as an officer or director of any issuer that has a class of securities registered pursuant to Section 12 of the Exchange Act or that is required to file reports pursuant to Section 15(d) of the Exchange Act. In a parallel criminal action against him in which Moffat pleaded guilty, United States v. Moffat, 10 CR 270 (SDNY), Moffat was sentenced to a term of imprisonment of six months, two years supervised release, and ordered to pay a criminal fine of $50,000.

The Consent Order and Final Judgment entered against Kurland: (1) permanently enjoins him from violations of Section 10(b) of the Exchange Act, Exchange Act Rule 10b-5, and Section 17(a) of the Securities Act; (2) orders him liable for disgorgement of $4,213,630.18, representing profits made and/or losses avoided as a result of the unlawful trading alleged to have occurred at New Castle, together with prejudgment interest thereon in the amount of $204,553.59, for a total of $4,418,183.77. In a parallel criminal action against him in which Kurland pleaded guilty, United States v. Kurland, 10 CR 069 (SDNY), Kurland was sentenced to a term of imprisonment of 27 months, two years supervised release, and was ordered to pay criminal forfeiture of $900,000.

The Court also entered a Stipulation and Order of dismissal as to New Castle, which is no longer operating as an investment advisor and has filed Form ADV-W with the Commission, withdrawing its registration as an investment advisor. It has agreed to cooperate with the Commission's staff and has represented, as a condition of the dismissal of the Commission's action against it, that it will not engage in further operations.

In addition, since the case was filed the SEC has:

  • entered into a settlement with Rajiv Goel, a former managing director in the treasury group of Intel Corp., as well as the Director of Strategic Investments at Intel Capital, an Intel subsidiary that makes proprietary equity investments in technology companies. Pursuant to the settlement, Goel is permanently enjoined from violating the antifraud provisions of the federal securities laws, Section 10(b) of the Exchange Act, Exchange Act Rule 10b-5, and Section 17(a) of the Securities Act. Goel is also required to pay disgorgement in the amount of $230,570.52, plus prejudgment interest in the amount of $23,447.21, for a total of $254,017.73. The Court will determine at a later date whether any civil penalty is appropriate as to Goel. Finally, Goel is barred from acting as an officer or director of any public company. Goel has agreed to cooperate with the SEC in connection with this action and related investigations.

  • entered into a settlement with Roomy Khan, an individual investor who had been employed at Intel in the late 1990s and had been subsequently employed at Galleon, pursuant to which Khan is permanently enjoined from violating the antifraud provisions of the federal securities laws, Section 10(b) of the Exchange Act, Exchange Act Rule 10b-5, and Section 17(a) of the Securities Act, and is required to pay disgorgement in the amount of $1,552,566.94, plus prejudgment interest in the amount of $304,398.77, for a total of $1,856,965.71. The Court will determine at a later date whether any civil penalty is appropriate as to Khan. Khan has agreed to cooperate with the SEC in connection with this action and related investigations.

  • entered into a settlement with Anil Kumar, a former director at the global consulting firm McKinsey & Co., pursuant to which Kumar is permanently enjoined from violating the antifraud provisions of the federal securities laws, Section 10(b) of the Exchange Act, Exchange Act Rule 10b-5, and Section 17(a) of the Securities Act, and is required to pay disgorgement in the amount of $2.6 million, plus prejudgment interest in the amount of $190,621, for a total of $2,790,621. The Court will determine at a later date whether any civil penalty is appropriate as to Kumar. Kumar has agreed to cooperate with the SEC in connection with this action and related investigations.

  • entered into a settlement with Schottenfeld Group, LLC, a New York limited liability company and registered broker-dealer, pursuant to which Schottenfeld is permanently enjoined from violating the antifraud provisions of the federal securities laws, Section 10(b) of the Exchange Act, Exchange Act Rule 10b-5, and Section 17(a) of the Securities Act, and is required to pay disgorgement in the amount of $460,475.28, plus prejudgment interest in the amount of $72,202.72, and a civil penalty of $230,237.64, representing fifty percent of the disgorgement amount, a discount from a one-time penalty in recognition of its agreement to cooperate. Schottenfeld also agreed to implement enhanced policies and procedures to prevent future securities laws violations, as well as to retain an independent consultant to review its policies and procedures.

  • entered into settlements with Choo-Beng Lee and Ali T. Far, who were both managing members of Far & Lee LLC, a Delaware limited liability company. In addition, Lee was president and Far a managing member of Spherix Capital LLC, an unregistered hedge fund investment adviser based in San Jose, California. Pursuant to the settlements, Lee and Far are permanently enjoined from violating the antifraud provisions of the federal securities laws, Section 10(b) of the Exchange Act, Exchange Act Rule 10b-5, and Section 17(a) of the Securities Act, and are required, jointly and severally, to pay disgorgement in the amount of $1,335,618.17, plus prejudgment interest in the amount of $96,385.52, and a civil penalty of $667,809.09, representing fifty percent of the disgorgement amount, a discount from a one-time penalty in recognition of their cooperation.

  • dismissed its claims against Far & Lee and Spherix, which are now defunct or nearly so, in exchange for their agreement to cooperate and cease doing business.

For further information, see Litigation Release Nos. 21255 (October 16, 2009), 21284 (November 5, 2009), 21397 (January 29, 2010), 21493 (April 20, 2010), 21526 (May 17, 2010), 21732 (November 8, 2010), 21740 (November 15, 2010), 21802 (January 10, 2011), and 21827 (January 26, 2011).

 

http://www.sec.gov/litigation/litreleases/2011/lr21834.htm


Modified: 02/01/2011