Pequot Whistleblower Eligible For $1 Million Of Fine

May 28 2010 | 10:11am ET

Whatever her motivations—citizenship, revenge or something else—the ex-wife of the former Pequot Capital Management employee at the center of the insider-trading allegations against the hedge fund probably won’t leave empty-handed.

Karen Kaiser—who was divorced from David Zilkha in 2005—could get a $1 million whistleblower reward for providing “direct evidence” of the alleged Pequot scam to investigators. Under a program instituted in 1989, whistleblowers can be awarded up to 10% of the fines paid in a case. Pequot and founder Arthur Samberg agreed yesterday to pay $10 million in fines—and almost $18 million in disgorgement and prejudgment interest—to settle the Securities and Exchange Commission’s insider-trading allegations.

Neither Pequot nor Samberg, who decided to shutter the hedge fund last year after the SEC renewed its probe, admitted any wrongdoing. The SEC is still pursuing its case against Zilkha, who is alleged to have passed tips about Microsoft Corp., where he was formerly employed, to Pequot.

Kaiser's lawyer told Bloomberg News that his client will pursue the reward.

The SEC originally dropped its case more than three years ago, citing a lack of evidence. But the Zilkha divorce case solved that problem. Incriminating e-mails between Zilkha and Pequot employees, including Samberg, were found on a hard drive Kaiser copied from the couple’s shared computer. Also as part of the divorce, Zilkha’s psychologist testified that her patient was fired when he stopped providing confidential tips to Pequot.

Pequot later settled with Zilkha for $2.1 million.


In Depth

An Interview With Harvest Volatility Management's Rick Selvala

Mar 23 2017 | 5:39pm ET

Several years of extremely low interest rates have pushed some investors into equities...

Lifestyle

'Tis the Season: Wall Street Holiday Parties Back In Fashion

Dec 22 2016 | 9:23pm ET

Spending on Wall Street holiday parties has largely returned to pre-2008 levels...

Guest Contributor

SEI: Private Debt Coming Into Its Own

Mar 8 2017 | 9:24pm ET

The explosive growth of private debt over the past few years has caused the lines...

 

From the current issue of