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SEC Goes to Work on Hedge Fund Investigation – Big Name Execs Intel Capital, IBM Arrested

Posted Oct 16 2009 10:01pm

This is the first time that court ordered authorized wire taps were used to investigate the world of inside trading, arrests made by the FBI.  Inside trading information around AMD was part of the information discussed according to the article as well as Hilton, Polycom and Google.  The one image company at the focus of all of this is the hedge fund company, Galleon Group. 

It is good to see the SEC with the help of the FBI making a comeback with enforcement.  In other related news B of A posted a 3rd quarter loss of one billion.  We wonder where all the money goes and why healthcare is so deprived.

The Banks Are Recovering – Healthcare Is Nowhere Near Recovery

“And so what do those big money makers use:  Robotic Investing Software and you can buy some robots online, but you can bet it’s not all the proprietary code that Goldman uses.

One company said set your algos and go golf, the robot will do the rest, so that’s how they do it with the right hardware and connections.  So this is how they live, set the algos and can spend the rest of the day leisurely or adjust the robot at any time.  This is what makes big bonuses, basically wagering.”

Hospitals and doctors are struggling to make ends meet while we continue to hear of big bonusesHarvard University today took a 1.3 billion dollar cash hit, and again we keep hearing the economy is getting better?  Well the inside traders economy seemed to be improving with hedge funds coming up with schemes as mentioned in a post below with basically gambling on human lives with bonds created with people with cashed in life insurance policies that have chronic or potentially fatal conditions, and the deal with the hedges was that investors who were in a pool where survivors were living too long would lose their money.  The link below is a real eye opener.  When you read all of this, Martha Stewart looks more like an angel by comparison.  Dollar amounts here of 12 million are small by Wall Street standards, but perhaps there’s more to come.  BD  

If you think the “so called death panels” are something to worry about, Human Hedge Funds

The Securities and Exchange Commission on Friday charged six finance and technology executives and a hedge fund with insider trading.

Those charged include a senior VP at IBM (NYSE: IBM ), a managing director at Intel (NSDQ: INTC ) Capital, and a director at McKinsey & Company.

The SEC said that billionaire Raj Rajaratnam, head of Galleon Management, a hedge fund advisory firm based in New York, conspired with five other individuals in a scheme that generated over $25 million in illegal gains. image

The SEC's complaint claims that Rajaratnam and his associates obtained confidential information about corporate earnings or takeover activity at several companies, including Google, Hilton, and Sun Microsystems.

SEC enforcement director Robert Khuzami said in a statement that Rajaratnam's financial results were not a consequence of savvy trading but of savvy networking. "He cultivated a network of high-ranking corporate executives and insiders, and then tapped into this ring to obtain confidential details about quarterly earnings and takeover activity," said Khuzami.

In addition to Rajaratnam, those charged include: New Castle Funds portfolio manager Danielle Chiesi of New York, N.Y., Intel Capital managing director Rajiv Goel of Los Altos, Calif., McKinsey & Company director Anil Kumar of Saratoga, Calif., New Castle senior managing director and general partner Mark Kurland of Mount Kisco, N.Y., and IBM senior VP Robert Moffat of Ridgefield, Conn.

New Castle Funds is the hedge fund named in the complaint.

From Reuters:

All of the defendants were arrested this morning by agents of the FBI. Rajaratnam, Kumar, and Chiesi were arrested in New York; Kurland was arrestedin Mt. Kisko, N.Y.; and Goel was arrested in San Jose, Calif. Moffatsurrendered this morning to the FBI in White Plains, N.Y. Rajaratnam, Chiesi,Kurland, Kumar, and Moffat will be presented in Manhattan federal court latertoday before U.S. Magistrate Judge Douglas F. Eaton. Goel will be presentedtoday in federal court in San Jose, Calif.

From approximately January 2006 until around July 2007, Rajaratnam and others engaged in schemes to trade on the basis of Inside Information pertaining to Polycom, Hilton, and Google. Rajaratnam obtained Inside Information relatingto these companies from the CW who, in turn, obtained this information fromvarious inside sources. Those sources included an insider at Polycom, a sourceat Moody's who provided Inside Information pertaining to Hilton, and a sourceat Market Street Partners who provided Inside information pertaining toGoogle. Based on trading related to information about these entities, Rajaratnam caused Galleon to earn a total profit of more than $12.7 million.In exchange for the Inside Information Rajaratnam received from the CW, Rajaratnam provided the CW with Inside Information on a number of companies.

SEC Charges Billionaire, Tech Execs With Insider Trading -- InformationWeek

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