Preet Bharara, the United States Attorney for the Southern District of New
York, announced that DOUG WHITMAN, a portfolio manager at Whitman Capital, LLC,
was found guilty by a jury in Manhattan federal court of conspiracy and
securities fraud crimes stemming from his involvement in two insider trading
schemes that earned his firm more than $900,000 in illegal profits. WHITMAN was
convicted on all four counts with which he was charged. As part of the schemes,
WHITMAN executed trades based on material, non-public information (“Inside
Information”), related to three publicly traded companies: Marvell Technology
Group, Ltd. (“Marvell”); Polycom, Inc. (“Polycom”); and Google, Inc. (“Google”).
He was convicted after a three-week trial before U.S. District Judge Jed S.
Rakoff.
Manhattan U.S. Attorney Preet Bharara said: “Douglas Whitman now joins the
grim procession of convicted Wall Street professionals who decided that the
rules don’t apply to them. The rules do apply. Over and over again, juries of
good, common-sense citizens have said the rules do apply, and they have held
defendants like Mr. Whitman accountable for breaking them. Mr. Whitman had a
hedge fund with his name on the door, with rules against insider trading. He
flouted those rules, tarnished his name, and now is a convicted felon facing
imprisonment. I want to thank both the jury for their service and the fine
career prosecutors from my office who so ably tried this case for their hard
work and dedication.”
According to the indictment, evidence presented at Whitman’s trial, as well
as testimony from other trials and court proceedings:
From 2007 through 2009, while running Whitman Capital, WHITMAN bought and
sold Marvell stock and options based on Inside Information, including earnings,
revenue, and/or other material financial and business information. The Inside
Information was provided to WHITMAN by Karl Motey, an independent research
consultant, who had obtained it from certain Marvell employees. In exchange for
the Inside Information, WHITMAN paid Motey through a soft dollar payment
arrangement between Whitman Capital and Motey’s consulting firm. WHITMAN also
provided the Marvell Inside Information to Wesley Wang, in exchange for other
Inside Information.
In another scheme, from 2006 to 2007, WHITMAN obtained Inside Information,
including earnings information and other material financial information,
pertaining to Polycom and Google from Roomy Khan, who worked in the hedge fund
industry. Khan obtained the Polycom Inside Information from an employee at the
company, and she obtained the Google Inside Information from an employee of a
firm that provided investor relations services to Google. WHITMAN used the
Polycom and Google Inside Information to execute securities transactions that
earned his firm more than $900,000 in illegal profits. In exchange for the
Inside Information, WHITMAN provided Khan with information about other publicly
traded technology companies.
WHITMAN, 54, of Atherton, California, was convicted of two counts of
conspiracy to commit securities fraud and two counts of securities fraud. Each
of the conspiracy counts carries a maximum penalty of five years in prison and a
fine of $250,000, or twice the gross gain or loss from the offense. Each of the
securities fraud counts carries a maximum penalty of 20 years in prison and a
maximum fine of $5 million. WHITMAN is scheduled to be sentenced by Judge Rakoff
on December 20, 2012, at 4:00 p.m.
WHITMAN’s co-conspirators, Karl Motey, Roomy Khan, and Wesley Wang,
previously pled guilty to insider trading charges and are awaiting
sentencing.
Mr. Bharara praised the investigative work of the Federal Bureau of
Investigation and thanked the U.S. Securities and Exchange Commission. He noted
that the investigation is continuing.
This case was brought in coordination with President Barack Obama’s Financial
Fraud Enforcement Task Force, on which Mr. Bharara serves as a co-chair of the
Securities and Commodities Fraud Working Group. President Obama established the
interagency Financial Fraud Enforcement Task Force to wage an aggressive,
coordinated, and proactive effort to investigate and prosecute financial crimes.
The task force includes representatives from a broad range of federal agencies,
regulatory authorities, inspectors general, and state and local law enforcement
who, working together, bring to bear a powerful array of criminal and civil
enforcement resources. The task force is working to improve efforts across the
federal executive branch, and with state and local partners, to investigate and
prosecute significant financial crimes, ensure just and effective punishment for
those who perpetrate financial crimes, combat discrimination in the lending and
financial markets, and recover proceeds for victims of financial crimes.
This case is being handled by the Office’s Securities and Commodities Fraud
Task Force. Assistant U.S. Attorneys Jillian Berman, Christopher LaVigne, and
Micah Smith are in charge of the prosecution.
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