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SEC Charges California Hedge Fund Manager Linked to Galleon Insider Trading Case

The Securities and Exchange Commission (“SEC”) charged hedge fund manager Douglas F. Whitman and his California based firm, Whitman Capital, LLC, with making $980,000 illegally in connection with an insider trading ring connected to Raj Rajaratnam and hedge fund advisory firm Galleon Management.

The SEC complaint stated that Whitman and his firm illegally traded Polycom, Inc. and Google, Inc. based on tips of material non-public information that Whitman obtained from an individual investor.  During 2006 and 2007, the tipper, a one-time associate of Raj Rajaratnam, provided Whitman with material non-public information on Polycom and Google.  In January 2006, the tipper, who was Whitman’s neighbor at the time, illegally tipped Whitman with information about Polycom’s quarterly financial results.  Whitman Capital accumulated 132,263 shares of Polycom stock, and then after the company announced its results, Whitman Capital liquidated its entire Polycom position for a profit of more than $360,000.  The SEC further alleged that the tipper illegally tipped Whitman with inside information about Google’s quarterly financial results before they went public, leading Whitman Capital to purchase 2,761 Google put option positions and generated ill-gotten profits of more than $620,000.

The complaint seeks a final judgment permanently enjoining the defendants from future violations of the federal securities laws, ordering them to disgorge their ill-gotten gains plus prejudgment interest, and ordering them to pay financial penalties.