Ex-Yahoo! bigwig! admits! insider! trading!
The US stock market regulator has charged an ex-Yahoo! exec and a pal with insider trading after the pair discussed a search engine partnership between Yahoo! and Microsoft.
The Securities and Exchange Commission (SEC) said Robert Kwok, who was Yahoo!’s senior director of business management, breached his duty to the company when he told Reema Shah, a mutual fund manager at a subsidiary of Ameriprise Financial, that the deal was on.
Shah had asked Kwok about the deal as rumours did the rounds in July 2009 that Microsoft and Yahoo! would team up; Kwok told her that the info was being kept under wraps at Yahoo! and only a few people knew.
Shah then told the mutual funds she managed to buy over 700,000 shares in Yahoo!, which were later sold for profits of around $389,000.
Kwok let on about the deal because, a year earlier, Shah had done the same for him: she tipped him off about an impending acquisition announcement between two companies that she knew about and he traded on his personal account on the tip. He only made off with a measly $4,754 however.
“Kwok and Shah played a game of you scratch my back and I’ll scratch yours,” Scott Friestad, associate director in the SEC’s Division of Enforcement, said in a canned statement.
“When corporate executives and mutual fund professionals misuse their access to confidential information, they undermine the integrity of our markets and violate the trust placed in them by investors.”
Both Kwok and Shah, who live in California, have agreed to settle the SEC’s charges of insider trading. A court will later decide how much of their ill-gotten gains they’ll have to pay back and what other fines they’ll face.
Under the settlements, Shah will be permanently banned from the securities industry, and Kwok will be permanently blocked from serving as an officer or director of a public company.
However, the pair are also in the dock for charges of conspiracy to commit securities fraud, which they pleaded guilty to and are awaiting sentencing.
Aside from the two specific cases in the insider trading charges, they had been exchanging tip-offs since they met in January 2008.
Kwok regularly gave Shah information on Yahoo!, such as whether its quarterly performance would meet analyst expectations and Shah would give him information she learned through her job so he could make personal investments. ®