Four California residents charged with insider trading [Big News Network (United Arab Emirates)]
(Big News Network (United Arab Emirates) Via Acquire Media NewsEdge)
Washington The Securities and Exchange Commission Friday charged four Northern California residents with insider trading in Ross Stores stock options and one of them with insider trading in stock options of software company Taleo Corporation ahead of its 2012 acquisition by Oracle Corporation.
The regulator alleges that the four people charged worked on the nonpublic information about monthly sales results leaked by one of the retailer's employees Roshanlal Chaganlal, who was a director in the finance department at Ross headquarters in Dublin, California.
The SEC further alleges that at the outset of the scheme, Chaganlal gave $17,000 to Saleem Khan for the purpose of insider trading in Ross securities using his brother-in-law's account.
They attempted to disguise the exchange by using two cashier's checks for $8,500 purchased in the name of Chaganlal's wife of a different surname.
Khan later funneled $130,000 of the generated trading profits back to Chaganlal by using third-party intermediaries. For example, Khan wrote Akbari a check for $35,000, and Akbari in turn wrote two checks totaling $35,000 to Chaganlal's wife. Another $75,000 was routed in a roundabout way to a title company so it could be credited at closing toward Chaganlal's purchase of a newly-built home.
"Khan and Chaganlal took advantage of confidential company data to systematically trade in Ross securities and reap millions of dollars in profits," said Jina L. Choi, director of the SEC's San Francisco Regional Office. "Even when insider traders try to conceal their profits and kickbacks by using other accounts and intermediaries, we're committed to piecing together these widespread schemes and catching the perpetrators."
Khan used the confidential information provided by Chaganlal to illegally trade on more than 40 occasions ahead of the company's public release of financial results.
Besides trading on his own, Khan also tipped his work colleagues Ranjan Mendonsa and Ammar Akbari so they too could trade in Ross stock options based on the nonpublic information. The insider trading resulted in collective profits of more than $12 million.
According to the SEC's complaint filed in federal court in San Francisco, Khan separately made approximately $450,000 in illicit profits by insider trading in stock options of software company Taleo Corporation, which was acquired by Oracle in 2012.
Khan began purchasing large numbers of options in Taleo six days before the merger announcement based on nonpublic information he received from an insider he knew at Oracle. Khan had never previously traded in Taleo securities.
By SEC's estimate Khan generated $5.4 million in profits in his own account, and $6 million in profits in his brother-in-law's account. Khan's supervisor Mendonsa made approximately $800,000 in insider trading profits based on the nonpublic information that Khan in turn tipped to him. Akbari made approximately $2,000 by insider trading on Khan's illegal tips.
The SEC alleges that the serial insider trading involving Ross securities began in August 2009 and continued until December 2012, when Chaganlal was terminated by the company.
The SEC's complaint names two relief defendants Khan's acquaintance Michael Koza and Khan's brother-in-law Shahid Khan for the purposes of recovering insider trading profits in their brokerage accounts through trades conducted by Khan. They each have agreed to settle the matter by paying the court the entire amount of insider trading profits remaining in their accounts, which total $240,741 for Shadid Khan and $31,713 for Koza.
The SEC's complaint charges Saleem Khan, Chaganlal, Mendonsa, and Akbari with violating the antifraud provisions of the federal securities laws. The complaint seeks permanent injunctive relief, disgorgement of illicit profits plus interest, and financial penalties. The complaint also seeks an officer-and-director bar against Chaganlal.
Khan will begin a 1-3/4 year prison term on June 23 after pleading guilty in an unrelated case, court records show, reports Reuters.
In Khan's defence his lawyer Chris Cannon, said: "Saleem has made hundreds of short-term trades in Ross, many of which were unprofitable, and if he were trading on inside tips he would have been able to avoid the unprofitable trades."
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