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U.S. Securities and Exchange Commission

Litigation Release No. 22042 / July 15, 2011

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

SEC Obtains Final Judgment as to Defendant Danielle Chiesi

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 Final Judgment as to Danielle Chiesi on July 12, 2011, 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 and others, alleging a widespread insider trading scheme involving hedge funds, industry professionals, and corporate insiders.

At the time of the alleged conduct, Chiesi was a consultant and portfolio manager at New Castle Funds LLC, formerly a registered hedge fund investment adviser. The SEC alleged that Chiesi traded on and tipped others to material, nonpublic information she learned from corporate insiders about Akamai Technologies, Inc., Sun Microsystems, Inc., IBM, and Advanced Micro Devices Inc.

The Final Judgment entered against Chiesi: (1) permanently enjoins her from violations of Section 10(b) of the Exchange Act of 1934 (“Exchange Act”) and Exchange Act Rule 10b-5, and Section 17(a) of the Securities Act of 1933 (“Securities Act”); and (2) orders her liable for disgorgement of ill-gotten gains of $500,000, together with prejudgment interest of $40,534.90, for a total of $540,534.90. Chiesi awaits sentencing in a parallel criminal action against her in which she pleaded guilty, United States v. Chiesi, 10 CR 1184 (RJH) (SDNY).

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

  • entered into a settlement with David Plate, a proprietary trader at broker/dealer Schottenfeld Group, LLC. Pursuant to that settlement, Plate is permanently enjoined from violations of Section 10(b) of the Exchange Act and Exchange Act Rule 10b-5; and is liable for disgorgement of $43,876.37, plus prejudgment interest of $9,415.54. The judgment further provides that the Court later will determine issues relating to a civil penalty. Plate has agreed to cooperate with the SEC in connection with this action and related investigations.
  • entered into a settlement with Gautham Shankar, a proprietary trader at Schottenfeld. Pusuant to that settlement, Shankar is permanently enjoined from violations of Section 17(a) of the Securities Act, Section 10(b) of the Exchange Act and Exchange Act Rule 10b-5; and is liable for disgorgement of $243,105.59, plus prejudgment interest of $34,462.35. The judgment further provides that the Court later will determine issues relating to a civil penalty. Shankar has agreed to cooperate with the SEC in connection with this action and related investigations.
  • entered into a settlement with Ali Hariri, an Atheros Communications, Inc. executive. Pursuant to that settlement, Hariri is permanently enjoined from violations of Section 10(b) of the Exchange Act, Exchange Act Rule 10b-5, and Section 17(a) of the Securities Act; and is permanently barred him from acting as an officer or director of any public company. Hariri also is liable for disgorgement of ill-gotten gains, together with prejudgment interest, for a total of $2,665.68.
  • entered into a settlement with Robert Moffat, Senior Vice President and Group Executive of IBM’s Systems and Technology Group. Pursuant to that settlement, Moffat is permanently enjoined from violating the antifraud provisions of the federal securities laws, Section 10(b) of the Exchange Act and Exchange Act Rule 10b-5, and barred from acting as an officer or director of any public company.
  • entered into a settlement with Mark Kurland, Chief Executive Officer of New Castle Funds LLC. Pursuant to that settlement, Kurland 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. Kurland is also 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.
  • dismissed its claims against 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. New Castle 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.
  • 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), 21827 (January 26, 2011), 21834 (February 1, 2011), 21839 (February 4, 2011), 22010 (June 21, 2011), and 22021 (June 30, 2011).

 

http://www.sec.gov/litigation/litreleases/2011/lr22042.htm


Modified: 07/15/2011