The SEC has charged Shammara Hussain, a former employee of IR firm Market Street Partners (MSP), in a widening of its investigation into the Galleon insider trading case.
On Monday the SEC brought charges against four more individuals, including Hussain, bringing the total number of people charged in the case against Galleon to 27.
Hussain’s name has long been associated with the Galleon investigation, but the SEC’s latest enforcement action explains in detail the role she played in the insider trading activity that has rocked Wall Street.
Back in 2007, MSP worked as an IR consultant to Google, giving MSP employees access to advance copies of the search firm’s earnings results. This allowed Hussain to discover that Google’s Q2 2007 results were due to come in way below analysts’ expectations.
She passed this information on to Roomy Khan, a hedge fund consultant, who traded on the information and passed it on to others, including Galleon founder Raj Rajaratnam, alleges the SEC in its enforcement action.
Hussain also passed the Google information on to family friend and hedge fund manager Choo-Beng Lee, who traded on the tip with his business partner, Ali Far, adds the regulator.
Following the successful tip, Hussain demanded a fee of $100,000-$200,000 per quarter for further information, although Khan declined this request, so Hussain stopped sending her tips, alleges the SEC. Hussain could not be reached for comment but her lawyer has previously denied that she asked for money in return for tips.
The SEC charge also recounts a separate incident in which Hussain herself traded on inside information that she received from Khan about the impending acquisition of software company Kronos by private equity firm Hellman & Friedman. Hussain traded on the deal in an account jointly held by her parents and made a profit of $21,000, alleges the regulator.
US regulators have called the Galleon case the biggest ever insider trading scandal. The story broke in 2009 after billionaire Rajaratnam and others were charged with being part of a $20 mn insider trading scheme.
Authorities obtained much of the evidence against Rajaratnam through wiretaps, and he is due to stand trial in February. He has denied any wrongdoing. Khan pleaded guilty to securities fraud in 2009 and is one of the government’s main cooperating witnesses.
The investigation sent shockwaves through the IR industry when it broke in 2009, leading IROs to reexamine their disclosure policies and relationships with investment professionals.