SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 16333 / October 14, 1999
SEC v. Arjun Sekhri, Amolak Sehgal, Pratima Rajan, Fuad Dow, Gordon W. Cochrane, Martin L. Thifault, Rohina Sharma, and Sharad Kapoor, defendants, and Mahendar Sekhri and Sharda Sekhri, relief defendants, Civil Action No. 98 Civ. 2320 (S.D.N.Y.) (RPP);
United States v. Arjun Sekhri, A/K/A "A.J." 99 MAG. 1148 (S.D.N.Y.) (MHD)
Former Salomon Smith Barney Investment Banking Associate Held on Criminal Charges in Insider Trading Scheme
The U.S. Attorney's Office for the Southern District of New York announced on October 12 that Arjun Sekhri, a former investment banking associate at Salomon Smith Barney, Inc. in New York City, was presented on criminal charges including insider trading, money laundering, wire fraud, and conspiracy to commit wire fraud and securities fraud. Magistrate Judge Theodore H. Katz ordered Sekhri detained pending trial. Sekhri fled the United States around the time civil and criminal charges were filed against him in 1998. He was arrested in Australia and subsequently waived extradition.
The charges against Sekhri arise out of an insider trading scheme in which Sekhri misappropriated inside information from Salomon. On April 1, 1998, the Securities and Exchange Commission filed an insider trading case involving Sekhri and others in the U.S. District Court for the Southern District of New York. The SEC's amended complaint, filed on May 19, 1998, charges Sekhri and certain other individuals to whom Sekhri supplied confidential information with illegal insider trading. The SEC alleges that, from September 1997 through January 1998, Sekhri, Amolak Sehgal, Pratima Rajan, Fuad Dow, Gordon W. Cochrane, Martin L. Thifault, Rohina Sharma, and Sharad Kapoor engaged in a highly profitable insider trading scheme by collectively purchasing call options and/or common stock shortly before six major corporate announcements. The defendants reaped total profits of at least $1.8 million from their illegal securities transactions.
The SEC alleges that Sekhri, the source of the inside information, was an investment banking associate at Salomon at the time of the trading. Salomon provided investment banking services in each of the relevant corporate transactions and Sekhri worked specifically on at least one of those transactions. Sekhri tipped Dow, Sekhri's former college roommate. Dow then tipped Cochrane and Thifault, all three of whom collectively purchased common stock and/or call options on the stock of MCI Communications Corp., Brooks Fiber Properties, Inc., Carson Pirie Scott & Co., Inc., Central and South West Corp., and Southern New England Telecommunications Corp. in advance of six different public announcements of significant mergers involving these companies. The complaint alleges that Sekhri also tipped Sehgal, his father-in-law, in advance of at least four of these announcements; Rajan, his friend, in advance of at least three of these announcements; Kapoor, his friend and then a broker at Merrill Lynch, Pierce, Fenner & Smith, Inc. in San Jose, California, in advance of six of these announcements; and Sharma, Kapoor's wife, in advance of at least four of these announcements. The complaint also seeks disgorgement from relief defendants Mahendar and Sharda Sekhri, Arjun Sekhri's parents, of assets transferred to them by the defendants.
Without admitting or denying the SEC's allegations, Dow, Cochrane, and Thifault settled the SEC's insider trading charges by consenting to the entry of final judgments requiring, among other things, payment of over $1.9 million. On October 14, 1998, a final judgment was entered against Cochrane, which (i) permanently enjoined Cochrane from violations of Sections 10(b) and 14(e) of the Securities Exchange Act of 1934 and Rules 10b-5 and 14e-3 thereunder; and (ii) required Cochrane to pay disgorgement of $648,201.84 in trading profits and prejudgment interest. The judgment did not impose a civil penalty based on Cochrane's demonstrated inability to pay. On October 22, 1998, a final judgment was entered against Dow, which (i) permanently enjoined Dow from violations of Sections 10(b) and 14(e) of the Securities Exchange Act of 1934 and Rules 10b-5 and 14e-3 thereunder; and (ii) required Dow to pay disgorgement of $489,214.78 in trading profits plus prejudgment interest. The judgment did not require Dow to pay disgorgement and prejudgment interest in excess of the funds in accounts that the SEC had froze, approximately $469,000, or any civil penalty, based on Dow's inability to pay. On July 7, 1999, a final judgment was entered against Thifault, which (1) permanently enjoined Thifault from violations of Sections 10(b) and 14(e) of the Securities Exchange Act of 1934 and Rules 10b-5 and 14e-3 thereunder; and (2) required Thifault to pay disgorgement of approximately $460,000 in trading profits and prejudgment interest, and approximately $ 333,000 in civil penalties. The judgment did not impose additional amounts as civil penalties based on Thifault's demonstrated inability to pay.
Dow, Cochrane, and Thifault previously pled guilty to criminal charges of insider trading. Dow was sentenced to two years imprisonment and ordered to pay $469,595 in restitution. Thifault was sentenced to five years' probation, to include one year of home confinement. Cochrane is awaiting sentencing.