Washington:
A former Yahoo executive and an Indian-American hedge fund manager have pleaded guilty to insider trading charges that involved exchanging confidential information on a deal between Yahoo and Microsoft for personal gains.
The case comes close on the heels of another high profile insider trading trial that began yesterday in a New York court involving another Indian-American Rajat Gupta, former Goldman Sachs director.
The Securities and Exchange Commission (SEC) yesterday alleged that Robert W Kwok, who was then a Yahoo's senior director of business management, told Indian-American Reema D Shah in July 2009 that a deal between Yahoo and Microsoft would be announced soon.
Based on Kwok's illegal tip, Shah prompted the mutual unds she managed to buy more than 700,000 shares of Yahoo stock that were later sold for profits of approximately USD 389,000, SEC alleged.
The SEC further alleged that a year earlier, the roles were reversed.
Shah, 40, tipped Kwok with material non-public information about an impending acquisition announcement between two other companies.
Kwok traded in a personal account based on the confidential information for profits of USD 4,754. Kwok and Shah, who live in California, have agreed to settle the SEC's charges.
Shah has pleaded guilty to one count of conspiracy to commit securities fraud and one count of securities fraud. The conspiracy count carries a maximum sentence of five years in prison, a maximum fine of USD 250,000, a statement from the US Attorney's office, Southern district of New York said.
The securities fraud count carries a maximum sentence of 20 years in prison, and a maximum fine of USD 5 million. As part of her plea agreement, Shah has also agreed to forfeit the proceeds she obtained as a result of the offence, it added.
Kwok, 36, has pleaded guilty to one count of conspiracy to commit securities fraud, which carries a maximum sentence of five years in prison and a maximum fine of USD 250,000, the statement said.
As part of his plea agreement, Kwok has agreed to forfeit the proceeds he obtained as a result of the offence, it added.
Shah's sentencing is scheduled for May 24. Kwok is scheduled to be sentenced on September 18. Under the settlements, Shah will be permanently barred from the securities industry and Kwok will be permanently barred from serving as an officer or director of a public company.
"Kwok and Shah played a game of you scratch my back and I'll scratch yours," Scott W Friestad, Associate Director in the SEC's Division of enforcement, said.
"When corporate executives and mutual fund professionals misuse their access to confidential information, they undermine the integrity of our markets and violate the trust placed in them by investors," he said.