Tuesday, 29 July 2014
Last updated 3 hours ago
Feb 13 2009 | 3:58am ET
Federal prosecutors in New York have launched a criminal investigation of Pequot Capital Management, looking into whether the hedge fund engaged in insider trading of Microsoft Corp. shares.
The U.S. Attorney’s Office in Manhattan and the Federal Bureau of Investigation are leading the probe, according to Condé Nast Portfolio. Last month, the Securities and Exchange Commission reopened its investigation into Pequot more than two years after declaring it had “insufficient evidence to bring a case.”
As with so much in this case, the new revelation came from the divorce proceedings of a former Microsoft employee who briefly worked at Pequot, and who allegedly passed nonpublic information about the software company to Pequout’s Arthur Samberg. In December, Portfolio reported that Pequot or Samberg had made some $2.1 million in payments (or promised payments) to the ex-employee, David Zilkha.
In a hearing on Jan. 28, Zilkha’s ex-wife’s lawyers told a Connecticut judge that a criminal investigation into the matter was underway.
“The U.S. Attorney, the FBI, and the SEC have contacted my client, and she's scheduled to appear before them next week,” Jill Blomberg, the lawyer for the former Karen Kaiser, the former Karen Zilkha, said. “There is an investigation, You Honor, into Mr. Zilkha's involvement with Mr. Arthur Samberg and with Pequot Capital.”
In December, Pequot said the payments stemmed from “a civil claim related to his employment and termination.” Zilkha worked for Pequot for just a few months in 2001 before he was fired.
Intriguing as the mysterious payments are, Zilkha’s divorce from his wife may have produced some altogether more damning evidence. As part of their divorce, which was finalized in 2005, Kaiser copied the hard drive of their shared computer. According to media reports, the hard drive contained e-mails between Zilkha, then a product manager at Microsoft, and a more senior employee at the software giants.
At around the same time he got his job offer—and e-mails seeking information—from Samberg, Zilkha e-mailed Mark Spain asking, “Have you heard whether we will miss estimates? Any other info?” Spain responded that “march was the best march on record,” that it “made up the shortfall” and left the company “on trace for revised forecast.” Pequot made a profit of some $2.1 million betting on Microsoft in April, the month Zilkha and Spain exchanged e-mails, and May of 2001.
The hard drive does not contain any evidence that Zilkha passed the information on to Samberg, according to Portfolio, and Pequot has denied any wrongdoing.
Jul 8 2014 | 10:48am ET
The surge in derivatives regulation is among the most complex challenges facing the financial services industry today. Northern Trust’s Joshua Satten recently spoke with FINalternatives to share insights into the challenges presented by new regulation and explore how the industry is responding. Read more…