Another corporate executive has been charged with passing inside information to Galleon hedge fund manager Raj Rajaratnam.
The US Securities and Exchange Commission (SEC) Friday charged a former senior executive at Xilinx Inc., a Silicon Valley technology company, for illegally tipping Rajaratnam with non-public information that allowed his Galleon hedge funds to make nearly US$1 million in illicit profits.
The executive, Kris Chellam, allegedly tipped Rajaratnam that Xilinx would fall short of its public revenue projections in December 2006. The SEC says that the tip enabled Rajaratnam to short Xilinx stock to illicitly benefit the Galleon funds. It also says that Chellam tipped Rajaratnam, who was a close friend, had a substantial investment in the Galleon funds, and was in discussions about going to work at Galleon. He was hired by the hedge fund firm in May 2007.
Chellam, who neither admits nor denies the allegations, has agreed to pay more than US$1.75 million to settle the SEC’s charges. The settlement is subject to court approval.
The proposed final judgment orders Chellam to pay US$675,000 in disgorgement (the same amount he was paid while employed at Galleon), US$106,383.05 in prejudgment interest, and a US$978,684 penalty. He would also be barred for five years from serving as an officer or director of a public company, and permanently enjoined from future violations of these provisions of the federal securities laws.
This latest charge comes in the wake of the sentencing of another Rajaratnam tipster, and former Goldman Sachs board member, Rajat Gupta, to two years in prison, a year of supervised release, and a US$5 million fine, by a New York court earlier this week. Last year, Rajaratnam was sentenced to 11 years in prison.
The SEC has now charged 32 defendants in its Galleon-related enforcement actions, which have exposed widespread insider trading at numerous hedge funds, generating illicit profits of approximately US$93 million.