Insider trading: Indian woman turns approver in US

Saturday, Oct 25, 2014,16:26 IST By metrovaartha A A A

After Mathew Martoma’s case an Indian woman portfolio manager, who had pleaded guilty to insider trading and cooperated with the US government in its crackdown on securities fraud cases, avoided jail term and has been sentenced to two years’ probation and a USD 500,000 fine.
Reema Shah, 42, had pleaded guilty in 2012 to securities fraud in connection with an insider trading scheme in which an executive with internet company Yahoo provided to her material, non-public information about the company’s quarterly earnings and potential business transactions.
Shah was at the time a portfolio manager at an asset management firm that managed billions of dollars in mutual funds and a hedge fund. Shah had faced a maximum of 25 years in prison and over USD five million in fine but US District Judge John Koeltl imposed a sentence of two years probation and a USD 500,000 fine on her during a hearing yesterday.
Manhattan’s top federal prosecutor Preet Bharara had submitted in court that Shah provided extensive substantial assistance to the Government in the investigation and prosecution of other persons who committed federal offenses. Taking into account Shah’s cooperation, Koeltl said she provided prompt, substantial and truthful evidence to government investigators.
In addition to the fine, Shah has been ordered to forfeit USD 11,750 to prosecutors – equal to the profits prosecutors say she personally made as a result of her criminal conduct – and approximately USD 377,000 to the US Securities and Exchange Commission to resolve parallel civil charges. According to court documents, from at least January 2008 through July 2009, Yahoo executive Robert Kwok provided confidential information concerning Yahoos quarterly earnings and potential business transactions with other companies to Shah who then executed trades based on the inside information.
Shah however began cooperating with investigators after federal agents approached her in 2009. Assistant US Attorney Benjamin Naftalis said Shah provided important and useful information about criminal activities at hedge fund giant SAC Capital that helped the government prosecute the Steven Cohen-led company. SAC has pleaded guilty to securities fraud and agreed to pay USD 1.8 billion in penalties. The compnay has since changed its name to Point72 Asset Management.
Shah’s recordings of her proactive assistance was lengthy, extensive and remarkable successful, Naftalis said. In court papers, the government said that Shah decided to cooperate promptly and assisted proactively in the covert investigation into insider trading from 2009 to 2010.
At the direction of the FBI, Shah secretly recorded more than 700 telephone calls and meetings with other investment professionals whom the government suspected as being involved in illegal insider-trading activities. She also identified about two dozen investment managers, research analysts and consultants whom she believed had engaged in insider trading.