By Grant McCool
NEW YORK Feb 10 A California hedge fund
manager was charged on Friday with making $900,000 illegally on
inside information about three technology companies, the latest
strand of the high-profile Galleon Group prosecutions against
money managers and traders.
Doug Whitman of Whitman Capital was accused of gleaning
secrets about Google Inc and Polycom Inc from
trader Roomy Khan, a one-time associate of Raj Rajaratnam, the
Galleon hedge fund founder. Rajaratnam was convicted in a
high-profile trial last May.
Investigators said Whitman also received inside information
on Marvell Technology Group Ltd from Karl Motey, a
trader and independent researcher who has pleaded guilty to a
criminal charge and is awaiting sentencing. The three companies
have not been accused of any wrongdoing.
Whitman pleaded not guilty to the charges. He was ordered
released on $1.5 million bail at an appearance on Friday
afternoon before U.S. Magistrate Judge James Cott in Manhattan.
Whitman's lawyer, David Anderson of law firm Sidley Austin,
said in a statement: "Mr. Whitman did not pay any insiders or
provide any personal benefit to any insiders for inside
information." Anderson said his client had cooperated with the
Federal prosecutors said Whitman made the illegal profit in
trading between 2006 and 2009. The U.S. Securities and Exchange
Commission filed related civil charges against him. The agency
called him a neighbor and friend of Khan.
Dozens of hedge fund managers, traders, consultants, lawyers
and executives have been charged since 2009 in a sweep by
federal authorities to stop money managers from gaining an
illegal edge in the market with inside information.
Evidence provided by Khan about trades in Google and Polycom
was used in the trial of Rajaratnam, who is serving an 11-year
Khan has pleaded guilty to a conspiracy charge. She has yet
to be sentenced, and is seeking leniency for having cooperated
with the government's probe.
Sanjay Wadhwa, associate director of the SEC's New York
office, said in a statement: "This action should send a strong
signal that the SEC will continue to pursue every angle of the
Galleon investigation to hold accountable those who have
undermined the integrity of our markets by engaging in illegal
Whitman, 54, of Atherton, California, surrendered to FBI
agents in New York, the FBI and U.S. prosecutors said. The
criminal charges of securities fraud and conspiracy carry a
combined possible maximum prison term of 25 years.
Whitman Capital in Menlo Park, California is a private
partnership focused on the technology industry, according to the
hedge fund's website.
The indictment released on Friday said in 2006 and 2007,
Whitman obtained confidential earnings information and other
business information from Khan about Polycom and Google.
In exchange, Whitman provided Khan with information about
other publicly traded technology companies, the court document
From 2007 to 2009, Whitman bought and sold Marvell stock
based on confidential earnings, revenue and other financial
information provided by Motey. Whitman paid Motey through "a
soft dollar payment arrangement," prosecutors said.
The case is USA v Doug Whitman in U.S. District Court for
the Southern District of New York, No. 12-125.