Continuing its relentless campaign against insider trading, federal authorities on Tuesday announced criminal charges against a former stock research analyst in a case connected to last week’s indictment of the hedge fund SAC Capital Advisors.
Sandeep Aggarwal, a former technology analyst at Collins Stewart, a research firm that has since become part of Cannacord Genuity, was charged with leaking secret information about a joint venture between Microsoft and Yahoo to at least two different hedge funds, including SAC.
F.B.I. agents arrested Mr. Aggarwal on Monday in San Jose, Calif., and he is expected to make an appearance in Federal District Court there on Tuesday. The Securities and Exchange Commission also brought a parallel civil action against Mr. Aggarwal, 40, who now lives in India. His lawyer, Sam Braverman, did not immediately return a request for comment.
The government said that on July 9, 2009, Mr. Aggarwal learned from friend who worked at Microsoft that the software giant had resumed discussions with Yahoo about a long-rumored search partnership. The next morning, according to court filings, Mr. Aggarwal’s firm sent out an e-mail blast to clients: “we are hearing deal talks are starting again â€" had stopped entirely a few weeks ago but contacts noting that YHOO back at the table.
But Mr. Aggarwal gave certain clients extra-special treatment, including Richard Lee, then a portfolio manager at SAC, according to prosecutors.
Later on July 9, the two had a conversation â€" caught on a government wiretap â€" on which Mr. Aggarwal told Mr. Lee that he had a close friend who worked at Microsoft, and that Aggarwal’s friend had informed him that Yahoo and Microsoft’s negotiations concerning the formation of an Internet search partnership were moving forward. He told him the deal could happen in the next two weeks.
Mr. Lee thanked Mr. Aggarwal for the “very specific information,†the government said, and proceeded to buy several hundred thousand shares of Yahoo stock for SAC, as well as a large position in his personal account.
This spring, federal authorities confronted Mr. Lee with the incriminating wiretap evidence and persuaded him to cooperate in the government’s investigation of SAC. He pleaded guilty to insider trading charges last week.
“Richard Lee has accepted responsibility for his prior conduct,†Mr. Lee’s lawyer, Richard D. Owens of Latham & Watkins, said last week.
Mr. Lee, 34, proved crucial to the strength of the government’s criminal case against SAC, not so much because of the Yahoo trading, but because of how he landed a job at SAC. Despite a warning that Mr. Lee was part of an â€insider trading group†at a previous employer and overruling objections from his own legal department, Steven A. Cohen, the billionaire owner of SAC, hired Mr. Lee, prosecutors said.
The earlier employer was Citadel, a large fund based in Chicago. Citadel, which has not been accused of wrongdoing, said “it does not have, and never has had, an ‘insider trading group.’â€
As for Mr. Aggarwal, prosecutors said that he not only leaked the secret deal information to SAC and another client, but that he also lied to his bosses at Collins Stewart. When asked where he obtained the information about the resumption of Yahoo-Microsoft deal talks, he lied that his source was someone who had retired from Microsoft years ago.
Mr. Aggarwal now has his own research firm, DigitalRoute, that focuses on the Internet and digital economy. He frequently gives interviews to print and broadcast media about technology stocks, appearing on CNBC as recently as 2011.
On his Web site, Mr. Aggarwals said that he lives with his wife and two boys, and splits his time between Silicon Valley and New Delhi. He also wrote he “enjoys playing squash as a stress buster.â€
