Rajaratnam friend agrees to settle SEC insider trading case

Fri Oct 26, 2012 2:26pm EDT

(Reuters) - A former chief financial officer at Xilinx Inc (XLNX.O) on Friday became the latest executive to settle civil charges of being part of now-imprisoned hedge fund tycoon Raj Rajaratnam's insider trading network.

The technology executive, Kris Chellam of Saratoga, California, was charged by the U.S. Securities and Exchange Commission of giving Rajaratnam confidential information on Xilinx in December 2006.

The tip helped the Galleon Group founder, who was Chellam's close friend, make nearly $1 million in illicit profits, the SEC said in its lawsuit.

Chellam has not been criminally charged. He agreed to pay $1.75 million to settle the case, the SEC said. The agreement is subject to approval by U.S. District Judge Barbara Jones in New York.

Chellam's lawyer, Christopher Steskal of Fenwick & West in San Francisco, could not immediately be reached for comment.

Xilinx, a maker of programmable chips, is not accused of wrongdoing.

Rajaratnam, 55, was convicted of criminal charges in May 2011. He is serving an 11-year prison term, one of the longest imposed for insider trading. He was also ordered to pay a fine of $92.8 million to the SEC.

In a broad crackdown on insider trading, the SEC and the U.S. Department of Justice have won scores of settlements, guilty pleas or trial convictions over the past four years.

Chellam was mentioned at Rajaratnam's trial as being part of a network of friends and business associates who tipped Rajaratnam and Galleon with corporate secrets.

The SEC had accused Chellam of tipping Rajaratnam with confidential details from internal company reports indicating that Xilinx would fall short of revenue projections. The tip enabled Rajaratnam to sell short Xilinx stock, making $978,684 after the negative information was announced on December 7, 2006.

At the time, Chellam had his own investment in Galleon funds and was a prospective employee at Galleon, the SEC said. It said Rajaratnam hired Chellam at Galleon in May 2007.

On Thursday, a federal appeals court in New York heard arguments in Rajaratnam's challenge of his conviction. Rajaratnam contends investigators improperly obtained permission from a judge in March 2008 to tap his cell phone. The court did not issue an immediate ruling.

The case is SEC v Kris Chellam in U.S. District Court for the Southern District of New York, No. 12-7983.

(Reporting By Grant McCool; Editing by Martha Graybow and Kenneth Barry)

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