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S.E.C. v. Doug Whitman and Whitman Capital

S.E.C. v. Doug Whitman and Whitman Capital

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Categories:Business/Law
Published by: DealBook on Feb 10, 2012
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07/10/2013

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George S. CanellosAttorney for PlaintiffSECURITIES AND EXCHANGE COMMISSIONNew York Regional Office3 World Financial Center, Suite 400New York, NY 10281
.
1022(212) 336-1020UNITED STATES DISTRICT COURTSOUTHERN DISTRICT OF
NEW YORK
.SECURITIES AND EXCHANGE COMMISSION,
.
Plaintiff,-against-COMPLAINTDOUGLAS F. WHITMAN,andWHITMAN CAPITAL LLC,
ECFCASE
Defendants.
Plaintiff Securities and Exchange Commission ("Commission"), for its Complaintagainst Douglas F. Whitman ("Whitman") and Whitman Capital, LLC ("WhitmanCapital") (collectively the "Defendants"), alleges as follows:
SUMMARY
1.
This case involves insider trading by Whitman and Whitman Capital in thesecurities
of
the public companies Polycom, Inc. ("Polycom") and Google, Inc.("Google") based on tips
of
material nonpublic information that Whitman obtained froman individual investor named Roomy Khan ("Khan")
.
Trading on the basis
of
thisinformation, Whitman Capital hedge funds reaped approximately $980,000 in ill-gottenprofits.
 
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2.
During 2006 and 2007, Khan provided Whitman with material nonpublicinformation that she obtained from Sunil Bhalla ("Bhalla"), a senior executive atPolycom, and Shammara Hussain ("Hussain"), an employee at Market Street Partners, aninvestor relations firm that provided consulting services to Google.
3.
In or about January 2006, Bhalla provided Khan with material nonpublicinformation concerning Polycom's calculation
of
its revenues and other financial resultsfor the fourth quarter
of2005
prior to Polycom's announcement
of
these quarterlyfinancial results to the public. Khan traded on this material nonpublic information, and. also passed it to Whitman, who traded on behalf
of
Whitman Capital based on theinformation. As a result, Whitman Capital reaped illicit profits
of
more than $360,000.
4~
In or about July 2007, Hussain tipped Khan to material nonpublicinformation concerning Google' s calculation
of
its earnings for
the
second quarter
of
2007 prior to Google's announcement
of
these quarterly results to the public. Khantraded on this material nonpublic information, and also passed it to Whitman. Whitmantraded on behalf
of
Whitman Capital based on the information. As a result, WhitmanCapital reaped more than $620,000 in illicit profits.5. In addition to tipping Whitman, Khan also passed the material nonpublicinformation that she obtained concerning Polycom and Google to investmentprofessionals at other hedge fund advisers, including Raj Rajaratnam
of
GalleonManagement LP ("Galleon"), and Jeffrey Yokuty and Robert Feinblatt
of
TriviumCapital Management LLC ("Trivium"). Like Whitman and Whitman Capital, bothGalleon and Trivium used this information to reap sizable profits for the hedge funds theymanaged.2 
 
NATURE
OF THE
PROCEEDINGS
AND
RELIEFSOUGHT
6. The Commission brings this action pursuant to the authority conferredupon it by Section 20(b)
of
the Securities Act
of
1933 ("Securities Act") [15 U.S.C. §77t(b)] and Section 21(d)
of
the Securities Exchange Act
of
1934 ("Exchange Act") [15U.S.C. § 78u(d)]. The Commission seeks permanent injunctions against each
of
the. defendants, enjoining them from engaging in the transactions, acts, practices, and courses
of
business alleged in this Complaint; disgorgement
of
ill-gotten gains
or
losses avoidedfrom the unlawful insider trading activity set forth in this Complaint, together withprejudgment interest; and civil penalties pursuant to Section
21
(d)(3) anellor Section 21A
of
the Exchange Act [15 U.S.C.
§§
78u(d)(3), 78u-l], and Section 20(d)
of
the SecuritiesAct
[5
U.S.c.
§ 77t(d)]. The Commission also seeks any other reliefthe Court may deemappropriate pursuant to Section 21(d)(5)
ofthe
Exchange Act [15 U.S.C. § 78u(d)(5)].
JURISDICTION
AND VENUE
7.
This Court has jurisdiction over this action pursuant to Sections 20(b),20(d), and 22(a)
ofthe
Securities Act [15 U.S.C.
§§
77t(b), 77t(d), and 77v(a)] andSections 21(d), 21(e), and 27
ofthe
Exchange Act [15 U.S.C.
§§
78u(d), 78u(e), and78aa].
8.
Venue lies in this Court pursuant to Sections 20(b) and 22(a)
of
theSecurities
Act
[15 U.S.C.
§§
77t(b) and 77v(a)], and Sections 21(d), 21A, and 27
of
theExchange Act [15 U.S.c.
§§
78u(d),
78u-l,
and 78aa]. Certain
of
the acts, practices,transactions, and courses
of
business alleged
in
this Complaint occurred within theSouthern District
of
New York. For example, Whitman Capital utilized a
New
York,
3 

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