The Insider's Guide To Insider Trading

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The Insider's Guide To Insider Trading Powered By Docstoc
					The Insider’s Guide
To Insider Trading
Raj Rajaratnam, co-founder of Galleon, grabbed most of the headlines this                                                                                                     Lee met Longoria
week, but he’s only one star in a galaxy of characters accused of insider trad-                                                                                               in 2009 and
ing. This guide to the case, based on Justice Dept. and SEC complaints, shows                                                                                                 later recorded their
how information allegedly flowed between defendants and the firms where                                                                                                       phone conversations
they worked at the time. The arrows represent just some of the tips that led to                                                                                               for the FBI.
specific charges.

                                                        In 2008, Rajaratnam allegedly
                                                        earned about $500,000 on
                                                        Kumar’s tip about eBay’s
                                                        planned layoffs.

                                                                                                      Rajaratnam allegedly earned                                                                    THE EXPERT NETWORK
                                                                                                       $45 million on illegal tips.                                                                  NETWORK
                                                                                                                                                                                                     Starting in November 2010, the Justice
                                                                                                                                                                                                     Dept. brought charges against persons
            The SEC has accused Gupta                                                                                                                                                                related to Primary Global Research, al-
      of repeatedly passing insider informa-                                                                                                                                                         leging the “expert networking” firm dealt
         tion to Rajaratnam, including tips
                                                                                                                                                                                                     in insider tips. The ring allegedly includes
           about Goldman’s earnings and
          Berkshire Hathaway’s $5 billion                                                                                                                                                            Samir Barai, founder of Barai Capital, who is said to have
             investment in the company.                                                                                                                                                              been born 96 percent deaf and to have taped conversa-
                                                                                                                                                                                                     tions because of his impairment. Also implicated is Donald
                                                                                                                                                                                                     Longueuil, a hedge fund manager and former Olympic
                                                                         Moffat’s tipoffs about IBM                                                                                                  speed-skating hopeful, now famous for allegedly taking
                                                                                                                                        Investigators called
                                                                         helped his friend Chiesi                                                                                                    apart hard drives with pliers and depositing the pieces in
                                                                                                                                        Hardin—the link be-
THE GALLEON                                                              earn $715,000 for                                              tween the Galleon and
                                                                                                                                                                                                      garbage trucks around Manhattan.
NETWORK                                                                  New Castle and avoid                                           Goffer rings—“Tipper X.”
Rajaratnam and five others                                               $1.02 million in losses.                                       Goffer referred to Hardin’s
were arrested on Oct. 16,                                                                                                               source as “The
2009. Here’s a rundown of                                                                                                               Goose,” as in the
some key players in his ring.                                                                                                           goose who lays                                                                                    ZVI GOFFER’S
Roomy Khan, among the first                                                                                                             golden eggs.                                                                                      NETWORK
to plead guilty, helped the FBI secure a wiretap on                                                      The former teenage beauty                                                                                                        Goffer and other former
Rajaratnam. Anil Kumar says the Galleon chief                                                            queen built sources at male-                                                                                                     Galleon employees were
paid him $1.75 million for confidential information                                                      dominated tech companies.                                                                                                        part of a second wave of
on McKinsey clients. In exchange for tips,                                                                                                                                                                                                government arrests in
                                                                                                                                                                                                                                          November 2009. Goffer
Rajiv Goel let Rajaratnam trade on his behalf
                                                                                                                                                                                                                                          allegedly received tips from
using nonpublic information, including a tip about
                                                                                                                                                                                                                                          Tom Hardin through Gautham
Hilton’s takeover. Adam Smith said his conspiracy                                                                                                                                                                                         Shankar, making $329,000 off
with Rajaratnam ran from 2003 to 2009. Mark                                                                                                                                                                                               the Hilton takeover tip. Goffer,
Kurland, who traded on illegal tips from Danielle                                                                                                                                                                                         Arthur Cutillo, and Jason
Chiesi, was sentenced to 27 months in prison and                                                                                                      According to SEC papers,                                                            Goldfarb used disposable
had to forfeit $900,000. Ali Hariri and Ali Far trad-                                                                                             Goffer was called “the Octopussy”                                                       phones to pass information
ed tips, but Far made hundreds of thousands while                                                                                                  because his tentacles reached                                                          about Ropes & Gray clients.
Hariri made only $2,500. Deep Shah, declared a                                                                                                        so many sources of inside                                                           After receiving a tip on the
fugitive in November 2009, was located in Mumbai                                                                                                             information.                                                                 3Com acquisition, Goffer broke
                                                                                                                                                                                                                                          his tippee’s phone in half and
last March, but hasn’t replied to the SEC’s lawsuit.
                                                                                                                                                                                                                                          bit the SIM card. Franz Tudor
                                                                                                                                                                                                                                          reportedly aided prosecutors
                                                                                                                                                                                                                                          by secretly recording
                                                                                                                                                                                                                                          conversations with Goffer and
                                                                                                                                                                                                                                          Michael Kimelman.

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