Whittier Trust Fund Manager Settles SEC Insider SuitPatricia Hurtado
Victor Dosti, a fund manager at Whittier Trust Co., settled a U.S. Securities and Exchange Commission lawsuit accusing him of trading on illicit tips on Dell Inc., Nvidia Corp. and Wind River Systems Inc. that he obtained from colleague Danny Kuo.
Dosti, 49, of San Marino, California, and Whittier Trust agreed to pay almost $1.7 million to settle the claims, the SEC said. Whittier Trust earned or avoided losses of more than $724,000 by trading on tips Kuo funneled from 2008 to 2010, the SEC alleged in a complaint filed today in federal court in Manhattan.
Kuo, a former analyst at South Pasadena, California-based Whittier Trust, pleaded guilty to federal charges and admitted being part of what prosecutors called a “criminal club” of fund managers, analysts and insiders at technology companies who earned more than $68 million by trading on nonpublic information that they swapped.
“Time and again, Dosti received what he knew was inside information from Kuo and traded on it to generate illicit gains,” Sanjay Wadhwa, senior associate director of the SEC’s regional office in New York, said in a statement.
Kuo, 37, of Diamond Bar, California, is cooperating with the U.S. in its investigation of insider trading.
The U.S. alleges that some of the illegal tips Kuo obtained on Dell and Nvidia were passed on by his friends, such as former SAC Capital Advisors LP analyst Jon Horvath, who last year pleaded guilty to giving nonpublic information to his fund manager. Michael Steinberg, who was Horvath’s boss, was indicted in March on insider trading charges by prosecutors in the office of Manhattan U.S. Attorney Preet Bharara.
Steinberg, who the U.S. says earned more than $1.4 million from tips about Dell and Nvidia earnings provided by the analyst, has pleaded not guilty and is awaiting trial.
According to the SEC’s complaint, Kuo twice in 2008 obtained nonpublic information about Dell’s earnings before the company’s quarterly announcements from Sandeep Goyal, a former Dell employee. Dosti was able to earn at least $103,000 in one trade and avoid losses of more than $78,000 before Dell’s Aug. 28, 2008, disclosure that its gross margin was “substantially worse” than expected, the SEC alleged. Goyal has pleaded guilty to taking part in the insider trading scheme.
In 2010, Kuo obtained inside information about Nvidia and passed it to Dosti, generating more than $149,000 in profits, according to the complaint. Illegal tips Kuo obtained on Wind River allowed Dosti and Whittier Trust to earn more than $247,000 in 2009, the SEC alleged.
Under today’s settlement, Whittier Trust agreed to pay a disgorgement, interest and penalties of more than $1.5 million while Dosti agreed to pay about $159,000, the SEC said.
Kuo was charged last year along with Level Global Investors LP co-founder Anthony Chiasson and former Diamondback Capital Management LLC portfolio manager Todd Newman. Both men were convicted by a federal jury in New York of securities fraud and conspiracy. Newman was sentenced to 4 1/2 years in prison while Chiasson was sentenced to 6 1/2 years.
Of the eight people charged by the U.S. in the scheme, six have pleaded guilty to insider trading and are cooperating with the U.S. Besides Kuo, they include Jesse Tortora, a former Diamondback analyst; Spyridon “Sam” Adondakis, an analyst at New York-based Level Global; Goyal and Hyung Lim, a former Altera Corp. executive.
Gary Lincenberg, a lawyer for Dosti, declined to comment on the SEC settlement.
“Our client is very pleased to have this matter finally behind them,” said Vincent Cappucci, a partner at Entwistle & Cappucci LLP who is representing Whittier Trust. He said Whittier Trust didn’t admit or deny wrongdoing as part of the agreement.
The case is SEC v. Dosti, 13-cv-03897, U.S. District Court, Southern District of New York (Manhattan).