SEC Charges Silicon Valley Exec With Insider-Trading

Oct 26 2012 | 2:13pm ET

The Securities and Exchange Commission has charged a former Silicon Valley executive with passing non-public information along to convicted hedge fund manager Raj Rajaratnam.

The SEC says Kris Chellam, a former senior executive with the tech firm Xilinx, tipped Rajaratnam in December 2006 with confidential details from internal company reports indicating that Xilinx would fall short of revenue projections it had previously made public.

When he passed the tip, Chellam had money invested with Galleon and was in talks with Rajaratnam about taking a job at the hedge fund, the SEC said. Galleon hired him in May 2007. As a result of the tip, Rajaratnam, a close friend of Chellam's, was able to short Xilinx stock, making an estimated $978,684 in illegal profits.

Chellam, who lives in Saratoga, Calif., has agreed to pay more than $1.75 million to settle the SEC’s charges. The settlement is subject to court approval.

“Chellam was entrusted with sensitive company information that he divulged to Rajaratnam knowing full well that Rajaratnam would trade on it,” said Sanjay Wadhwa, associate director of the SEC’s New York regional office and deputy chief of the enforcement division’s market abuse unit. “Corporate executives who exploit company confidences for personal gain will ultimately be held accountable for their illegal acts.”

As part of the proposed final judgement, Chellam will also be barred for five years from serving as an officer or director of a public company, and permanently enjoined from future violations of these provisions of the federal securities laws.

Chellam neither admits nor denies the charges.

The charge against Chellam brings to 32 the number of defendants in the SEC's Galleon-related enforcement actions and comes just as Rajat Gupta, the former head of consulting giant McKinsey & Co., was sentenced to two years in prison for passing tips to Rajaratnam. 

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