A former Abaxis Inc. employee agreed to pay about $145,000 to settle U.S. regulatory claims that she passed confidential data to her brother, who used the information to make illegal trades in the company’s stock.
ThanhHa Bao, 57, who worked in the Union City, California-based medical device manufacturer’s finance department, also agreed to be barred from serving as an officer or director of a public company for five years, the Securities and Exchange Commission said today in a statement.
Bao’s brother, Tai Nguyen, 50, an expert networking consultant, was sentenced last month to serve a year and day in prison by a federal court judge in New York after pleading guilty to leaking inside information to Noah Freeman, a former hedge-fund manager at Sonar Capital Management and SAC Capital Adviors LP. Nguyen also admitted that he passed illegal tips to Barai Capital Management LP founder Samir Barai and others from 2006 to mid-2009.
“When corporate insiders leak confidential information to a select few, the integrity of our markets is undermined,” Sanjay Wadhwa, senior associate director of the SEC’s regional office in New York, said in a statement. “Abaxis entrusted ThanhHa Bao with market-moving information, and she violated that trust to financially benefit her family.”
Melinda Sarafa, Bao’s attorney, declined to comment on the settlement.
Both Freeman and Barai have pleaded guilty to criminal insider trading charges and are cooperating with the U.S. government’s continuing investigation.
Bao wasn’t charged by prosecutors in the office of Manhattan U.S. Attorney Preet Bharara, which is handling the criminal cases.
Bao regularly tipped nonpublic information to Tai Nguyen, whose trading in advance of Abaxis’ quarterly earnings generated about $145,000 in illegal profits, the SEC said.
Nguyen, who pleaded guilty to a count of conspiracy to commit securities fraud and wire fraud in the related criminal case, said he passed the information to clients of his equity research firm Insight Research, including hedge fund managers. Barai and Freeman and their funds earned about $6.2 million as a result of the insider-trading scheme, prosecutors said.
At his sentencing, Nguyen said his crimes destroyed his relationship with his siblings and that his sister was fired from her job.
He said he decided to use his sister for the illegal tips because he had lost an earlier job and was desperate to continue having Freeman and Barai as his customers.
“When I lost my job, my best customers were Sam and Noah,” Nguyen said. “They were always asking me for the best information. I was wrong. Sam and Noah made money on my recommendations in the past. But they were not satisfied. They wanted an edge.”
Nguyen was ordered to surrender to U.S. prison officials by May 1.
The SEC settlement with Bao stems from an investigation into expert networks that has led to insider-trading cases against 40 entities or individuals who have reaped more than $430 million in alleged insider trading gains, the agency said.
The SEC said that Nguyen obtained information about Abaxis’s quarterly earnings from Bao, of Union City, California from 2006 to 2009. He traded in his own account, reaping about $145,000, the SEC said. Nguyen agreed to forfeit $400,000 to the U.S. as part of his sentence.
The SEC’s claims against Nguyen are pending. His lawyer, David Wikstrom, told U.S. District Judge George Daniels in a letter in February that the case was in settlement talks “which cannot be concluded until after imposition of sentence” in the criminal case.
The SEC case is SEC v. Tai Nguyen and ThanhHa Bao, 12-cv-05009, and the criminal case is U.S. v. Nguyen, 12-cr-00495, U.S. District Court, Southern District of New York (Manhattan).