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A former UBS Group AG compliance officer was charged by U.K. regulators with passing tips on five occasions to a London man who traded on the information, according to court records.

Fabiana Abdel-Malek, 34, and Walid Choucair, 38, were each charged with five counts of insider dealing between June 2013 and June 2014, a court clerk said by phone Wednesday, reading charges filed by the Financial Conduct Authority. Abdel-Malek, who has a law degree, had worked as a compliance officer at UBS since 2007, according to her LinkedIn profile, where her surname is listed as Malek.



The Securities Appellate Tribunal (SAT) today admitted Reliance Industries’ (RIL) appeal against a ban on trading in the equity derivatives market for a year imposed by the Securities and Exchange Board of India.

In March, SEBI had ordered RIL to give up the Rs. 447.27 crore of illegal gains it made through the network on trades in 2007 and pay an additional penal interest of 12 per cent per annum from November 29, 2007. RIL and the 12 front entities are also banned from accessing the equity derivatives market for a year.

Counsel for Reliance Industries Harish Salve appealed against the SEBI order at SAT. The next hearing in the case has been posted for early August.

Meanwhile, Salve asked SAT to allow RIL to continue to invest the company’s surplus cash in mutual funds. Some of these funds, he argued, may trade in equity derivatives and this should not be construed as going against the SEBI order.

In its response, counsel for SEBI asked RIL to submit an application to the regulator in this regard with the names of the fund houses that RIL invests in.

Salve added that the company does not have any current F&O positions in equity.

In March, SEBI, under its new chief Ajay Tyagi, had found Reliance Industries guilty of unfair trade practices and “perpetrating fraud in the securities market”, which resulted in “illegal gains” for the company.

The case dates back to March 2007 when the Mukesh Ambani-led Reliance Industries decided to sell five per cent stake in a subsidiary listed company Reliance Petroleum.

However, instead of directly selling shares in the cash market and risking a fall in the price, RIL chose to bet against its subsidiary’s shares in the derivatives market through 12 front entities, according to SEBI’s investigations.

These front entities executed trades in the cash market below the last traded price of the stock, hence triggering a fall in the share price of Reliance Petroleum. This fall in share price allowed them to profit from their own short positions in the derivatives segment to the tune of Rs. 447.27 crore, SEBI found.

According to SEBI’s findings, RIL made illegal gains of Rs. 60.28 a share on 7.42 crore shares.

Reliance Petroleum had merged with RIL in 2009.

An insider is one who because of his status has access to price sensitive information which is not in public domain. James Surowiecki quoted, “If companies tell us more, Insider Trading will be worthless“. Quite precisely, as per Regulation 2 (ha) of the SEBI (Prohibition of Insider Trading) Regulations, 2015 (“PIT Regulations”) Unpublished Price Sensitive Information (“UPSI”) is not generally known to the public. But if known, may likely affect the price of the securities in the capital market.

The issue occurred in February 2007 when alerts were generated at the share market regarding dealing in shares of Indian Petrochemical Corporation Limited (“IPCL”) wherein it was observed that some entities purchased large quantities of IPCL shares before it announced its intention to declare interim dividend and considered to amalgamate with Reliance Industries Limited (“RIL”). In March 2016, SEBI by disposing of the charges of Insider Trading against Reliance Petroinvestments Ltd. (“RPIL”) added further lucidity to the understanding of who an insider may be.

Major Findings

  • RPIL was not an insider as there was no evidence to establish the access of UPSI.
  • RPIL is not a person “deemed to be connected”.
  • RIL did not exercise any voting power in RPIL directly.

Factual Matrix:

  • RPIL, which also held 46% stake in IPCL, took a commercial decision authorizing its Directors to invest INR 30 crores in the equity of IPCL. Further, it made additional investments of up to INR 100 Crore in the equity of IPCL.
  • On March 2, 2007, IPCL made an announcement to the stock exchanges for a declaration of Interim Dividend. It is pertinent to note that the order to purchase 98,280 shares of IPCL were placed before an announcement for a declaration of Interim Dividend was made.
  • On March 4, 2007, the proposal for merger of RIL and IPCL was discussed and on the next day, the steps for initiating the proposed merger were taken.
  • On March 10, 2007, a joint meeting of the boards of RIL and IPCL took place where a joint report was submitted setting out the recommended swap ratio was deliberated on. Subsequently, the Boards of RIL and IPCL approved the merger at their respective Board Meetings.
  • In view thereof, SEBI ordered an investigation in June 2007 regarding buying, dealing or selling in shares of IPCL in order to determine if any provisions of the SEBI Act or Rules and Regulations thereunder were violated.

RPIL’s Plea

  • RPIL submitted that the acquisition of shares in IPCL was a part of creeping acquisition of IPCL which was already underway. For better understanding of the subject matter, creeping acquisition is when any person holds 15% or more but less than 55% of shares or voting rights of a target company (IPCL in the present case), such person can acquire additional shares as would entitle him to exercise more than 5% of the voting rights in any financial year ending March 31 after making a public announcement to acquire at least additional 20% shares of target company from the shareholders.
  • RPIL further added that their investment of INR 30 Crore was a commercial decision as they had made a decision to commence creeping acquisition of IPCL shares. As the investment limit agreed to, was almost exhausted in June 2006. Thereafter, the share prices of IPCL had started to increase and eventually touched INR 325 per share, as a result of which shares were not purchased further.
  • Moreover, RPIL stated that the relevant trade did not take place abruptly, the shares in question were purchased on the basis of the share price of IPCL and in line with the commercial decision of RPIL.
  • RPIL pleaded that the past trading pattern of RPIL in the shares of IPCL should have been taken into consideration by the SEBI to ascertain whether the relevant trades were conducted on the basis of UPSI, as there was no proof incumbent upon it in order to sustain a charge of insider trading.

SEBI’s Observation

The two announcements made by IPCL were not Price Sensitive Information

According to the investigation report (“IR”), RPIL had made two announcements:

  • The order to purchase 98,280 shares of IPCL.
  • An announcement to the stock exchanges for a declaration of Interim Dividend.

The share price of IPCL more or less moved in sync with the movement in Sensex. Wherein, the scrips witnessed a substantial price rise subsequent to the announcement of amalgamation of IPCL with RIL.

RPIL is not an insider as defined in Regulation 2(e) of PIT Regulations

Regulation 2(e) of PIT Regulations stipulate that an insider is one who is or was connected with the company or is deemed to have been connected with the company and is reasonably expected to have access to UPSI in respect of securities of a company, or has had access to such UPSI.

RPIL is not a person ‘deemed to be connected’ within the meaning of Regulation 2(h) of the PIT Regulations

The Adjudicating Officer noted that it is imperative to establish that the same individual or body corporate holds more than a third of the voting rights with respect to both the Companies being examined for the purposes of this clause.

It was found that RIL did not exercise any voting power in RPIL directly, as is evident from the shareholding pattern of RPIL during the financial year 2006-07 and RIL as a single entity did not directly hold the requisite one-third shares in RPIL, as the shareholding of RPIL was cross-held by a number of subsidiaries. Moreover, one-third of the voting right in RPIL were exercised by Reliance Ventures Ltd. and not by RIL.

On the basis of the foregoing findings, the Adjudicating Officer disposed of the Adjudication Proceedings initiated against RPIL.

Key Takeaway

Trading by an insider in the shares of a Company is not in itself violation of law. In fact, trading by the Insiders (directors, employees, officers etc.) is a positive sign which should be encouraged by the Companies as it aligns its interest with those of the insiders. The law on the other hand prohibits trading by an insider in breach of fiduciary and duty of care and confidence towards the stock of a Company on the basis of non-public information to the exclusion of others. Therefore, in our view SEBI action of disposing of the insider trading charges against RPIL holds good. The reason being, PIT Regulations were put in place as a fresh tryout for those having perpetual control over UPSI. As suggested in the Sodhi Committee Report, it placed paramount thrust upon review of empirical evidence and feedback after the concept of trading plan was introduced. In view thereof, the present case at hand goes on to affirm the judicial intent of the PIT Regulation in spirit.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.


A former Expedia computer support technician was sentenced to 15 months in prison on Tuesday after admitting he stole confidential information from senior executives’ emails to profit from insider trading.

Jonathan Ly, 28, was sentenced by U.S. District Judge John Coughenour in Seattle after pleading guilty in December to a securities fraud charge for having engaged in an insider trading scheme that prosecutors said netted him $331,000.

As part of a plea deal, Ly had also agreed to repay Expedia the $81,592 it spent investigating the computer intrusion. He previously reached a $375,907 settlement with the U.S. Securities and Exchange Commission.

Prosecutors had sought a two-year prison sentence for Ly, a resident of San Francisco, according to court papers. A lawyer for Ly, John Runfola, said he was grateful for the 15-month term the judge imposed.

According to court papers, in 2013, Ly began exploiting his administrative access privileges to secretly review the contents of devices belonging to executives including Expedia’s chief financial officer and head of investor relations.

Prosecutors said that using the non-public information he obtained, Ly executed a series of well-timed trades in Expedia stock options.



NEW YORK: A 41-year-old Indian citizen has been arrested on charges of insider tradingand making thousands of dollars using confidential information of a private equity firm’s acquisition of a technology company.

Avaneesh Krishnamoorthy, who lives in New Jersey, served as a vice president and risk management specialist for a Manhattan-based investment bank from 2015 till this month.

He is charged with one count of securities fraud, which carries a maximum sentence of 20 years in prison and a maximum fine of $5 million.

Acting Manhattan US Attorney Joon Kim said Krishnamoorthy made approximately $48,000 in illicit profits through the insider trading scheme.

The Securities and Exchange Commission filed a parallel civil complaint alleging that the accused learned that Golden Gate Capital planned to acquire publicly traded advertising technology company Neustar Inc.

He then began trading in Neustar securities. The trading took place in two brokerage accounts that Krishnamoorthy allegedly kept hidden from his employer, which had been approached by Golden Gate Capital to finance the transaction.

Krishnamoorthy was presented in Manhattan federal court before United States Magistrate judge Kevin Nathaniel Fox on Tuesday.

Kim said Krishnamoorthy has been charged with violating his duty to his company and trading on insider information.

“He allegedly exploited his access to information about a pending acquisition to purchase stock and options, making tens of thousands of dollars in illegal profit for himself,” the attorney said.

The insider trading case is among the first brought by Kim, who succeeded Preet Bharara, Manhattan’s top federal prosecutor after he was fired by the Trump administration.

Bharara had successfully prosecuted several high profile insider trading cases, including those against India-born Rajat Gupta and his one time friend and business associate Raj Rajaratnam.

According to the complaint filed in Manhattan federal court, as vice president and risk management specialist, Krishnamoorthy had access to material non-public information concerning mergers and acquisitions for which the investment bank he worked in might potentially provide financing



Insider trading was at its peak in the 1980s, when a series of mergers and takeovers meant that execs were privy to plenty of market-moving information. The king of insider trading was Ivan Boesky, who became an icon of the era. He ran with some other big financial players, including Michael Milken, who ultimately pleaded guilty to several other felonies, and managed to sidestep insider trading charges.

In 1986, Boesky advised an audience of UC Berkeley students, “You can be greedy and still feel good about yourself.” He made the cover of Time Magazine the same year, which is when the SEC ultimately accused him of trading information from a Drexel Burnham Lambert banker. Boesky settled out of court with a payment of $100 million dollars, then served 22 months in prison.

Ivan Boesky amassed a fortune of over $200 million in the 1980s before an insider trading scandal landed him with a $100 million fine and prison time.
Born in Detroit in 1937, Ivan Boesky studied law before becoming a successful financier and amassing a fortune worth over $200 million dollars. His involvement in a 1986 insider trading scandal, however, ruined his reputation and landed him with a $100 million dollar fine and a prison sentence. The character Gordon Gekko in Wall Street (1987) is rumored to be partially based on Boesky.

White Collar Criminal

Financier, born in Detroit, Michigan. The son of a Russian immigrant, he studied law and worked as a tax accountant before moving into securities analysis, forming his own firm in 1975. Boesky was credited with (or blamed for) pioneering the junk bond market, later a symbol of the excesses of the 1980s. He had become one of Wall Street’s most successful arbitrageurs when he admitted to insider trading charges in 1986. Fined $100 million, he served time in prison before being given parole for good behavior in 1990.

In 1966, Boesky and his wife moved to New York where he worked at several brokerage houses. In 1975, he opened his own firm, the Ivan F. Boesky & Company, with $700,000 (equivalent to $3.1 million in 2016) in seed money from his wife’s family with a business plan of speculating on corporate takeovers. Boesky’s firm grew from profits as well as buy-in investments from new partnerships. By 1986, Boesky had become an arbitrageur who had amassed a fortune of more than US$200 million by betting on corporate takeovers and the $136 million in proceeds from the sale of The Beverly Hills Hotel.Boesky was on the cover of Time magazine December 1, 1986.

In 1987, a group of partners sued Boesky over what they claimed were misleading partnership documents.The U.S. Securities and Exchange Commission investigated him for making investments based on tips received from corporate insiders. These stock acquisitions were sometimes brazen, with massive purchases occurring only a few days before a corporation announced a takeover.

Although insider trading of this kind was illegal, laws prohibiting it were rarely enforced until Boesky was prosecuted. Boesky cooperated with the SEC and informed on others, including the case against financier Michael Milken. As a result of a plea bargain, Boesky received a prison sentence of 3 12 years and was fined US$100 million. Although he was released after two years, he was permanently barred from working in securities. He served his sentence at Lompoc Federal Prison Camp near Vandenberg Air Force Base in California.

Boesky never recovered his reputation after doing his prison time, and paid hundreds of millions of dollars in fines and compensation for his Guinness share-trading fraud role and a number of separate insider dealing scams. Later, Boesky, who is Jewish, embraced his Judaism and even took classes at the Jewish Theological Seminary of America where he had been a major donor; however, in 1987, following the fallout from his financial scandal, The New York Times reported that “after Ivan F. Boesky had been fined $100 million in the insider-trading scandal, the Jewish Theological Seminary, acting at his request, took his name off its $20 million library.”

His involvement in criminal activities is recounted in the book Den of Thieves by James B. Stewart.

Another version of these events is recounted by Jonathan Guinness in his book Requiem for a Family Business which suggests the SEC granted him immunity from prosecution and allowed him to continue to insider trade for significant profit whilst wire tapping him to entrap others.

In a 2012 interview with the New York Times, a cousin of Boesky’s disclosed that he is living in La Jolla, California



As a compliance officer for Morgan Stanley, Randi Collotta worked with her husband to leak secrets to her friend Marc Jurman, a broker in Florida. The SEC accused the couple of taking $9,000 in kickbacks for trading, and they both admitted they were wrong.

Randi Collotta reportedly cried during the hearing while the couple faced the music. The couple agreed not to appeal the case so long as the sentence was under a certain amount of time.

Randi Collotta was a compliance lawyer at Morgan Stanley and had access to information on several pending transactions, including the 2004 deal by Penn National Gaming to buy Morgan Stanley client Argosy Gaming; the 2005 deal between Adobe Systems and client Macromedia; the 2005 deal by ProLogis to buy Morgan Stanley client Catellus Development; and the 2005 deal byUnitedHealth Group to acquire client PacifiCare Health Systems.

Manhattan prosecutors said Thursday that the Collottas provided material nonpublic information about upcoming deals involving Morgan Stanley clients to Marc Jurman, a Florida-based broker, who traded on the information. Jurman has already pleaded guilty in the case.

The SEC also has been probing whether employees at investment banks are tipping favored hedge fund clients with non-public details of upcoming transactions to keep or win more business.

In the arrest case Thursday, prosecutors said Morgan Stanley research analyst Jennifer Wang passed along material information she accessed at Morgan Stanley to her husband, Ruben Chen, and the two allegedly traded on the information in an account set up in Wang’s mother’s name. They are each charged with one count of conspiracy and three counts of securities fraud, facing a possible prison term of 65 years.

Last week, prosecutors arrested a former Credit Suisse investment banker and charged him with insider trading in several transactions for clients of the firm over the course of the last year, including trading in options of Houston energy firm TXU days before it agreed to a $32 billion buyout by Kohlberg Kravis Roberts and Texas Pacific Group.


Reliance Industries has been asked to disgorge Rs 447 crore, along with an annual interest of 12 per cent since November 29, 2007, which itself would be more than Rs 500 crore, taking the total disgorgement amount to nearly Rs 1,000 crore.
SEBI banned Reliance Industries and 12 others from equity derivatives trading for one year.
The case is related to alleged fraudulent trading in the F&O space.
The Mukesh Ambani-led firm has been directed to disgorge nearly Rs 1,000 crore.

Securities and Exchange Board of India (SEBI) today banned Reliance Industries and 12 others from equity derivatives trading for one year and directed the Mukesh Ambani-led firm to disgorge nearly Rs 1,000 crore for alleged fraudulent trading in a 10-year-old case.

A company spokesperson said it will challenge the order. Reliance Industries has been asked to disgorge Rs 447 crore, along with an annual interest of 12 per cent since November 29, 2007, which itself would be more than Rs 500 crore, taking the total disgorgement amount to nearly Rs 1,000 crore.

The case related to alleged fraudulent trading in the F&O space in the securities of RILs erstwhile listed subsidiary Reliance Petroleum.

In a 54-page order passed by Whole-Time Member G Mahalingam, RIL and 12 other entities have been prohibited from dealing in the “equity derivatives in the F&O segment of stock exchanges, directly or indirectly”.


The ban will be in place for one year from today. The 12 other entities are Gujarat Petcoke and Petro Product supply, Aarthik Commercials, LPG Infrastructure India, Relpol Plastic Products, Fine Tech Commercials, Pipeline Infrastructure India, Motech software, Darshan Securities, Relogistics (India), Relogistics (Rajasthan), Vinamara Universal Traders and Dharti Investment and Holdings. Reliance Industries has been directed to disgorge the amount, along with interest within 45 days.

Mahalingam said the directions are being passed after taking into consideration the magnitude of the fraud across the markets. “I am inclined to pass certain directions against the noticees in order to protect the interest of the investors and reinstil their faith in the regulatory system,” the order said. “The noticees may, however, square off or close out their existing open positions.”

The Reliance Industries group had earlier sought to settle the case, but SEBI had refused. The proceedings in the long-pending case were expedited in the last few months. Reliance Petroleum has been merged with the listed parent firm.

Meanwhile, Reliance Industries issued a statement with regards to the matter and has said that SEBI had imposed unjustifiable sanctions.

In an order issued today, market regulator Securities and Exchange Board of India (SEBI) barred Reliance Industries Limited from trading in equity derivative Future & Options markers for one year in RPL case.

SEBI also ordered ordered RIL to pay Rs 447 crore plus interest as fine within 45 days in a seven-year-long insider trading case. SEBI said the company had made unlawful gains of Rs 513 crore.

SEBI has also issued showcause notices to 13 companies on Reliance Petroleum case.

The SEBI order says:

Under Sections 11, 11B of the SEBI Act, 1992, Section 12A of the Securities Contracts (Regulation) Act, 1956 read with Regulation 11 of SEBI (Prohibition of Fraudulent and Unfair Trade Practices relating to the Securities Market) Regulations, 2003

In the case of Reliance Petroleum Ltd. (RPL) –


1. Reliance Industries Ltd. (PAN No. AAACR5055K)

2. Gujarat Petcoke and Petro Product supply Pvt. Ltd. (PAN No. AABCG9773E)

3. Aarthik Commercials Pvt. Limited. (PAN No. AACCR0191A)

4. LPG Infrastructure India Pvt. Limited. PAN No. AAACL7928F)

5. Relpol Plastic Products Pvt. Limited. (PAN No. AAACN6007D)

6. Fine Tech Commercials Pvt. Limited. (PAN No. AAACF5232A)

7. Pipeline Infrastructure India Pvt. Limited. (PAN No. AABCD2718F, AABCD2719F)

8. Motech software Pvt. Limited. (PAN No. AACCM0039Q)

9. Darshan Securities Pvt. Limited. (PAN No. AAACD1408Q)

10. Relogistics (India) Pvt. Limited. (PAN No. AACCR3050J)

11. Relogistics (Rajasthan) Pvt. Limited. (PAN No. AAACZ1853B)

12. Vinamara Universal Traders Pvt. Limited. (PAN No. AACCV5090J)

13. Dharti Investment and Holdings Pvt. Limited. (PAN No. AACCD2509C)

Directions :

In view of the above findings and taking into consideration the magnitude of the fraud across the markets; the quantum of unlawful gains made by the Noticee No. 1 (Reliance Industries Ltd ) and the role of the agents in facilitating the fraudulent design, I am inclined to pass certain directions against the noticees in order to protect the interest of the investors and re-instill their faith in the regulatory system.

Accordingly, in exercise of the powers conferred upon me under section 19 of the SEBI Act, 1992 read with sections 11 and 11B of the SEBI Act, and Regulation 11 of SEBI (Prohibition of Fraudulent and Unfair Trade Practices Relating to the Securities Market) Regulations, 2003, I hereby pass the following directions:-

(i) The noticees named above shall be prohibited from dealing in equity derivatives in the F&O segment of stock exchanges, directly or indirectly, for a period of one year from the date of this order. The noticees may however square off or close out their existing open positions.

(ii) Noticee No. 1 shall disgorge an amount of ? 447.27 crores, as ascertained in para No. 5.5 above along with interest calculated at the rate of 12% per annum from 29 November, 2007 onwards, till the date of payment.

(iii) Noticee No. 1 shall pay the said amounts within 45 days from the date of this Order either by way of demand draft drawn in favour of “Securities and Exchange Board of India”, payable at Mumbai or by e-payment* to SEBI account


Huang Guangyu, was the Chairman of GOME Group, which is the largest consumer electronics retailer in China. He had a net worth of US$1.7 billion as of 2005, according to Forbes magazine’s world’s richest people ranking

Guangyu was born an impoverished peasant from south China. He built a business selling cheap products from that region to cities in the North, and ultimately became the richest man in the country. He founded Gome, which became the largest consumer electronics company in China. In 2008, he and his wife were accused of insider trading in shares of Gome, among other things. He was sentenced to 14 years in jail, ending the bizarre story of the quick rise and quick fall of one of China’s most notable entrepreneurs.

On November 24, 2008 the Hong Kong Stock Exchange indefinitely halted trading in shares in GOME, amid reports of a police investigation of Huang Guang Yu, the company’s Chairman, Executive Director and Controlling Shareholder.Furthermore, Huang was reported to be charged with alleged stock market manipulation, on which police declined to comment, according to the state-run China Daily newspaper. He resigned from the post of Chairman on 16 January 2009.

A Chinese court sentenced Huang Guangyu to 14 years in prison, a punishment that is likely to be seen as a warning to the country’s business executives.

Even by the standards of China, Huang Guangyu’s rise was meteoric. He left school and his impoverished home at 16. By 36 he was a billionaire, the founder of a retailing giant and the wealthiest man in the country.

But the entrepreneur’s fall proved just as abrupt. At 41, he is beginning a 14-year prison sentence following his conviction for bribery, insider trading and illegal foreign exchange dealings.

His fortune was valued at between $2.7bn (£1.83bn) and $6bn. But in November 2008, shortly after he topped the Hurun rich list, he was detained and accused of manipulating stock prices. Today the state news agency Xinhua reported that a court in Beijing had jailed him, fined him 600m yuan (£60m) and confiscated property worth 200m yuan. His wife, Du Juan, was fined 200m yuan and sentenced to three and a half years for insider trading, Xinhua said.

Huang, also known as Wong Kwong Yu, was born into poverty in Chaoshan, southern China. He dropped out of school in 1985 and went into business with his elder brother with 4,000 yuan borrowed from friends and family.

Like many entrepreneurs at the time, they realised that cheap products from fast-developing southern China could be sold for considerably more in the north. It was not always smooth going. Huang once recalled trying to trade fabric, only to discover than no one liked the patterns he had chosen.

“The material and the issue of seasons made my head ache. I could not work it out. But electrical appliances are used by everyone, so there is not a big risk,” he said.One story, possibly apocryphal, involves them stacking empty boxes on their stall because they could not afford stock. If a customer wanted a product, they would rush off to buy it from another vendor.

Huang proved equally canny when he founded the Gome chain of home appliance retailers. “Prior to Huang and Gome, the idea of retail in China was to get your customer into the shop and sell them something as expensive as possible,” said Rupert Hoogewerf, whose Hurun rich list put Huang in the top spot in 2005, 2006 and 2008. “He turned that idea on its head and basically said: if you come to Gome, we will give you the best possible prices.”

Huang also invested in advertising and launched aggressive takeover bids so the chain could keep expanding.

China’s rapid urbanisation fuelled the boom. But doing business also required good connections.”The nature of retail in the early days was such that each region probably had a dominant state-owned retail competitor. When you are dealing with these sorts of competitors, it wouldn’t surprise me at all if you ended up getting into bed with some rather unpleasant characters,” Hoogewerf said.

Five senior police and tax officials were detained or questioned in relation to the investigation into Huang, state media have reported. But while leaders have stressed the need to tackle widespread corruption, observers say prosecutions reflect personal connections as much as the seriousness of alleged crimes.

“[The case] shocked a lot of the entrepreneurial class – the fact he was taken down, but also the fact he allowed himself to be. It’s one thing to be ambitious and have a good business but another not to have put in place protective measures – cultivating government relations that would be able to avoid things getting to the courts. He has to have done something pretty bad or upset someone pretty important,” said Hoogewerf.

“The water is pretty murky.”

What prompted the investigation is unclear, but some believe that attempts to cultivate friends in high places made him a target. “If you cosy up to a particular politician, by default that politician’s enemies will be yours,” Hoogewerf said.

“Huang’s case is not unique; it gained more attention because he was the richest person in China,” said Liu Shanying, an analyst at the Institute of Political Science in the Chinese Academy of Social Sciences. “If you want to do business, it is hard for you to make it big without a good relationship with government. Of course, [that] is not a bad thing….but during the process of building up a good relationship, it is easy for the owner of the power and the owner of the business to exchange interests privately.”

Liu added that people had been expecting more senior officials to be named in connection with the case.Even if Huang serves his full sentence he will be only 55 when he is released. And while he resigned as chairman of Gome following his detention, he still holds a third of its shares. And last week three executives from Bain Capital – an American private equity firm that invested in the company last summer – were ousted from the board by shareholders affiliated with Huang. The executives were subsequently reinstalled. But it looks as if the tycoon’s remarkable story may contain a few more chapters.




Litigation Release No. 20115 / May 14, 2007

Securities and Exchange Commission v. Christopher M. Balkenhol, Case No. C-07-2537 JCS (N.D. Cal. filed May 14, 2007)

SEC Charges Former Oracle Vice President with Illegal Insider Trading in Stocks of Oracle Acquisiton Targets

Trader Misused Confidential Information Gleaned From Spouse, Who Was Lead Executive Assistant to Oracle’s CEO and Co-Presidents

The Securities and Exchange Commission today filed insider trading charges against a former Oracle Corporation vice president who allegedly traded on confidential information about Oracle acquisition targets gleaned from his spouse, who was also employed by Oracle. The Commission alleges that Christopher Balkenhol, 40, of San Mateo California, learned about secret merger negotiations from his wife, who worked at Oracle as the lead executive assistant to Oracle’s CEO and two co-Presidents. Without admitting or denying the Commission’s allegations, Balkenhol agreed to settle the action against him, paying a total of approximately $198,000-including a penalty of nearly $100,000.

The Commission’s complaint, which was filed in the United States District Court for the Northern District of California, alleges that Balkenhol traded in a series of Oracle acquisition targets during 2004 and 2005. Balkenhol allegedly learned about the planned acquisitions from his wife, who had access to the schedules of Oracle’s three top executives and was aware of significant merger-related meetings. The Commission does not allege that Balkenhol’s wife knew about Balkenhol’s illicit trades. Rather, the complaint alleges that Balkenhol breached a duty not to misuse confidences gleaned from his wife for his own gain.

The complaint alleges that Balkenhol engaged in pattern of insider trading by purchasing stock in Oracle acquisition targets before any public announcement of Oracle’s interest. Balkenhol’s first profitable trade came on March 1, 2005, when he invested $85,000 in Minneapolis-based Retek Inc. the day after Oracle executives began considering a tender offer for Retek. When Oracle announced the tender offer the following week, Retek’s stock price jumped and Balkenhol sold the shares for approximately $15,000 in alleged unlawful profits.

Balkenhol allegedly continued his pattern of insider trading with a series of stock purchases in another acquisition target, Siebel Systems, Inc., during Oracle’s negotiations to acquire the company in 2005. On June 9, 2005, the day after Oracle’s two co-Presidents secretly met with Siebel’s CEO to initiate merger discussions, Balkenhol bought over $270,000 worth of Siebel’s stock. Over the next three months, Balkenhol made three additional purchases of Siebel stock, each following a critical advance in the confidential negotiations. Again, Balkenhol’s wife had access to detailed inside information relating to each such advance. From June to September, Balkenhol ultimately purchased over 50,000 shares of Siebel stock for a total of approximately $448,000. Immediately after Oracle’s September 12, 2005 announcement of its acquisition of Siebel, Balkenhol sold his entire position for approximately $82,000 in unlawful profits.

The total of approximately $198,000 Balkenhol agreed to pay in settlement of the Commission’s action includes $97,282 in disgorgement, $4,115 in prejudgment interest and a $97,282 civil penalty. Balkenhol has also agreed to a permanent injunction from further violations of Sections 10(b) and 14(e) of the Securities and Exchange Act of 1934, and Rules 10b-5 and 14e-3 thereunder.

The Commission acknowledges the assistance of the National Association of Securities Dealers (NASD) in this matter.

SEC Complaint in this matter

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