* Rakoff rejects another SEC settlement
* Schottenfeld had agreed to pay about $763,000
* Accord part of insider trading probe centered on Galleon
By Jonathan Stempel
NEW YORK, April 5 U.S. District Judge Jed
Rakoff refused to approve an agreement by a trading company
tied to the Galleon Group hedge fund insider trading case to
pay about $763,000 to settle a U.S. Securities and Exchange
Commission securities fraud lawsuit.
The refusal came six days after the trading company,
Schottenfeld Group LLC, won approval from a different Manhattan
federal judge, Richard Sullivan, to pay $1.21 million to settle
a related SEC civil lawsuit.
It marks Rakoff's latest rejection of an SEC settlement to
resolve fraud charges. Last September, he rejected a $33
million accord between the regulator and Bank of America Corp
(BAC.N) over the Merrill Lynch merger. Rakoff in February
approved a revised, $150 million accord.
Schottenfeld agreed in its second SEC settlement to pay a
$230,238 civil fine, $460,475 of disgorged profits and $72,203
of interest. It also agreed to improve compliance procedures
and hire an independent consultant.
In a two-page order, Rakoff said the settlement "does not
appear unreasonable on its face" and is similar to the accord
that Sullivan approved, but nonetheless said he "requires
further information" before granting approval.
He demanded that the parties by April 12 provide more
details on how the disgorgement was calculated, including on
the alleged illegal trading profits and losses; more specifics
about the improved compliance; and details on the timing and
manner of appointing the consultant.
Kenneth Breen, a lawyer for New York-based Schottenfeld,
declined to comment. SEC representatives did not immediately
return requests for comment.
Former Schottenfeld traders Zvi Goffer, David Plate and
Gautham Shankar are among 21 individuals to face criminal or
civil charges or both in the hedge fund trading probe, which is
centered on Galleon Group founder Raj Rajaratnam.
In November, the SEC accused the individuals of trading on
inside information on such companies as Google Inc (GOOG.O) and
Hilton Hotels Corp. Hilton is now controlled by private equity
firm Blackstone Group LP (BX.N).
Rakoff is overseeing the SEC's civil lawsuit against
Rajaratnam and other defendants. That case is scheduled for
trial on Feb. 14, 2011.
The case is SEC v. Galleon Management LP et al, U.S.
District Court, Southern District of New York, No. 09-08811.
(Reporting by Jonathan Stempel; Additional reporting by Karey