Conn. couple gets $1 mln SEC award for Pequot

Fri Jul 23, 2010 5:48pm EDT

* Tips led to $28 million Pequot settlement

* Lawyer for couple says data on hard drive helped SEC

* Ex-Pequot employee faces administrative trial

By Jonathan Stempel

NEW YORK, July 23 (Reuters) - A Connecticut couple has been awarded a record $1 million for information that led to an insider trading settlement against a prominent hedge fund adviser and civil proceedings against the wife's former husband.

The U.S. Securities and Exchange Commission said on Friday that Glen and Karen Kaiser of Southbury, Connecticut discovered key evidence that helped the agency reach an agreement for Pequot Capital Management and its Chief Executive Arthur Samberg to pay $28 million to settle fraud charges over trades in Microsoft Corp (MSFT.O) shares.

The $1 million award to the Kaisers is a record for a whistleblower who provided information in connection with an insider trading case, the agency added.

Karen Kaiser, 45, was once married to David Zilkha, a former Microsoft employee who the SEC said tipped Pequot in April 2001 about an upcoming earnings report from the software maker, while they were in the process of hiring him.

The SEC said Samberg traded on the inside information, reaping $14.8 million of illegal profits.

Documents in the Zilkhas' divorce proceedings revealed that Pequot agreed to make a $2.1 million payment to David Zilkha several years after his departure from the firm in November of 2001.

Senator Arlen Specter in January, 2009, said he and Senator Charles Grassley had sent a letter to Samberg the prior month asking about the payment, and that Samberg replied it was to settle a dispute related to Zilkha's employment at Pequot.

Zilkha, in a deposition in the divorce case, invoked his right against self-incrimination about whether he received the $2.1 million from Pequot.

"We initially got involved to figure out why David Zilkha seemed so reluctant to tell Karen about this $2.1 million payment from Pequot," said Mark Sherman, a lawyer in Stamford, Connecticut who represents the Kaisers, in an interview on Friday. "Once we analyzed the family hard drives, we were able to help the SEC connect the dots."

A home number for the Kaisers could not immediately be located. Glen Kaiser, 52, is an anesthesiologist, and a call to his office was not immediately returned.

Pequot once held $15 billion of assets and was among the world's most successful hedge funds. Samberg began winding down Pequot last year.

The SEC in May began administrative proceedings against Zilkha.

"Mr. Zilkha adamantly asserts his innocence as to any wrongdoing," said Henry Putzel, a lawyer for Zilkha, in an interview on Friday. An administrative trial is expected to begin in October, he added. (Reporting by Jonathan Stempel in New York; Editing by Tim Dobbyn)

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