Bloomberg News

Whittier Trust Fund Manager Settles SEC Insider Trading Suit (1)

June 07, 2013

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. (DELL:US), Nvidia Corp. (NVDA:US) and Wind River Systems Inc. that he obtained from colleague Danny Kuo.

Dosti and Whittier Trust agreed to pay almost $1.7 million to settle the charges, the SEC said. Dosti, 49, of San Marino, California, and Whittier Trust earned more than $724,000 by trading on tips Kuo funneled from 2008 to 2010, the SEC alleged in a complaint filed today in U.S. District Court in Manhattan.

Kuo,a former analyst at South Pasadena, California-based Whittier Trust, admitted to being part of 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, pleaded guilty and is cooperating with the U.S.

SAC Analyst

The U.S. alleges that some of the illegal tips Kuo obtained 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 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 (DELL:US) 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.

Nvidia Information

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.

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.

Gary Lincenberg, a lawyer for Dosti, didn’t immediately return a voice-mail message left at his office seeking comment on the SEC suit.

The case is SEC v. Dosti, 13-cv-03897, U.S. District Court, Southern District of New York (Manhattan).

To contact the reporter on this story: Patricia Hurtado in New York at pathurtado@bloomberg.net

To contact the editor responsible for this story: Andrew Dunn at adunn8@bloomberg.net


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