April 12, 2010 / 4:18 PM / 10 years ago

SEC asks Judge Rakoff to OK pact in Galleon case

* Rakoff had refused to OK settlement absent more details

* Schottenfeld had agreed to pay about $763,000

* Accord part of insider trading probe centered on Galleon

NEW YORK, April 12 (Reuters) - The U.S. Securities and Exchange Commission urged a Manhattan federal judge to approve a settlement with a company tied to the Galleon Group hedge fund insider trading case, a week after the judge refused to do so.

The $763,000 settlement with Schottenfeld Group LLC would resolve a lawsuit over three former traders’ alleged use of inside information to trade on such companies as Google Inc (GOOG.O), Hilton Hotels Corp and software company Kronos Inc.

U.S. District Judge Jed Rakoff on April 5 said the accord “does not appear unreasonable on its face” and was similar to a related $1.21 million settlement approved by Judge Richard Sullivan in the same court. He nonetheless refused to approve it absent “further information.”

In a joint letter made public on Monday, the SEC and New York-based Schottenfeld described the trades in more detail, and the relationship between the alleged improper profits and the civil penalty being imposed.

Schottenfeld agreed to pay a $230,238 civil fine, $460,475 of disgorged profits and $72,203 of interest.

The letter also describes Schottenfeld’s proposed improved compliance procedures, and details on an independent consultant that the company plans to retain for a year.

In September, Rakoff rejected the SEC’s $33 million accord with Bank of America Corp (BAC.N) over the Merrill Lynch merger. He approved a revised $150 million accord in February.

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.

Rakoff is overseeing the SEC’s civil lawsuit against Rajaratnam and other defendants. That case is scheduled for trial on Feb. 14, 2011.

Hilton is now controlled by private equity firm Blackstone Group LP (BX.N).

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; Editing by Phil Berlowitz

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