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.