Hedge Fund Manager Arrested For Insider-Trading

Feb 10 2012 | 1:04pm ET

Another hedge fund manager has been arrested and charged in the Justice Department's ongoing insider-trading investigation.

Doug Whitman surrendered to the Federal Bureau of Investigation in New York this morning, the 64th person charged in a series of government insider-trading probes. Whitman will make his first court appearance in New York federal court later today on two counts of securities fraud and two counts of conspiracy.

Prosecutors said that Whitman's Menlo Park, Calif.-based Whitman Capital earned more than $900,000 by participating in two insider-trading schemes from 2006 through 2009. In one, Whitman allegedly traded confidential information with Roomy Khan, a former Intel Corp. employee and neighbor in Atherton, Calif., who cooperated in the Galleon Group case. He also allegedly paid Karl Motey, another cooperating witness, this time in the Primary Global Research expert-network case, for other information.

"Inside tips, illegal short cuts and corrupt collaborations have no place in a trading strategy, and there is a high price to pay for those who think and act otherwise," U.S. Attorney Preet Bharara said. "With today's charges, Doug Whitman now joins the growing list of privileged professionals who mistakenly thought the rules did not apply to them."

Whitman's lawyer, David Anderson, said that Whitman "did not pay any insiders or provide any personal benefit to any insiders for inside information," and did not trade on any such information. Anderson added that Whitman had been cooperating with the authorities.

Khan's and Motey's "claims are false and will be proved false," he said. "Doug Whitman is innocent of the insider-trading charges that were brought against him."

If convicted, Whitman faces up to 50 years in prison and millions in fines.

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