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Univ. of Toledo College of Law

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Monday, November 8, 2010

SEC Settles with Two Defendants in Rajaratnam Insider Trading Case

On October 27, 2010 and November 5, 2010, respectively, the United States District Court for the Southern District of New York entered Consent Orders and Judgments as to Defendants Roomy Khan ("Khan") and Rajiv Goel ("Goel") in the SEC's insider trading case, SEC v. Galleon Management, LP, et al.  The SEC filed its action on October 16, 2009, against Raj Rajaratnam ("Rajaratnam"), Galleon Management, LP ("Galleon"), Goel, and others. On November 5, 2009, the Commission amended its complaint to add allegations against additional entities and individuals, including Khan.

Rajaratnam is the founder and a Managing General Partner of Galleon, a New York hedge fund, which at the time of the alleged insider trading had billions of dollars under management. When the SEC's complaint was filed, Goel, a friend of Rajaratnam's, was a managing director within the treasury group of Intel Corp. ("Intel"), as well as the Director of Strategic Investments at Intel Capital, an Intel subsidiary that makes proprietary equity investments in technology companies. Khan was an individual investor who had been employed at Intel in the late 1990s and had been subsequently employed at Galleon.

The SEC alleged that Rajaratnam unlawfully traded based on inside information involving numerous companies. It further alleged that Goel acquired material non-public information while working at Intel and passed that information to Rajaratnam, who traded on it. The SEC also alleged that Khan acquired material non-public information from several sources, including a senior executive at Polycom, Inc., a Moody's rating agency analyst, and an employee at an investor relations consulting firm, and traded on that information. Khan also passed such information on to others, including Rajaratnam, who traded on it. The SEC charged Rajaratnam, Goel, and Khan with violations of Section 10(b) of the Securities Exchange Act of 1934 ("Exchange Act") and Rule 10b-5 thereunder, and Section 17(a) of the Securities Act of 1933 ("Securities Act").

The Consent Order and Judgment entered against Khan permanently enjoins her from violating the antifraud provisions of the federal securities laws and also orders her to pay disgorgement in the amount of $1,552,566.94, plus prejudgment interest in the amount of $304,398.77, for a total of $1,856,965.71. The order provides that the Court will determine at a later date whether any civil penalty is appropriate. Khan has agreed to cooperate with the SEC in connection with this action and related investigations.

The Consent Order and Judgment entered against Goel permanently enjoins him from violating the antifraud provisions of the federal securities laws and also orders him to pay disgorgement in the amount of $230,570.52, plus prejudgment interest in the amount of $23,447.21, for a total of $254,017.73. The order provides that the Court will determine at a later date whether any civil penalty is appropriate. The order also bars Goel from acting as an officer or director of any issuer that has a class of securities registered pursuant to Section 12 of the Exchange Act or that is required to file reports pursuant to Section 15(d) of the Exchange Act. Goel has agreed to cooperate with the SEC in connection with this action and related investigations.

http://lawprofessors.typepad.com/securities/2010/11/sec-settles-with-two-defendants-in-rajaratnam-insider-trading-case.html

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