Washington: A former executive at Yahoo! and a former Indian-American mutual fund manager have pleaded guilty to fraud and insider trading charges relating to deals between Yahoo and Microsoft and a couple of other companies. In a civil action Monday, the Securities and Exchange Commission alleged that Robert W. Kwok, who was Yahoo’s senior director of business management, informed Ameriprise Financial’s Reema D. Shah in July 2009 of a pending deal between Yahoo and Microsoft.
Shah had made inquiries to Kwok when there were rumours about a partnership between the two companies, the SEC alleged.
Kwok confirmed the reports and told Shah the information was confidential, the SEC said. Shah bought more than 700,000 shares of Yahoo stock that were later sold for profits of approximately $389,000.
The SEC further alleged that a year earlier, the roles were reversed. Shah told Kwok about non-public information regarding an impending acquisition announcement between two other companies, Kwok made a profit of $4,754 as a result of that information, it is alleged.
Kwok and Shah have agreed to settle the SEC’s charges. Financial penalties will be determined later. Shah will be permanently barred from the securities industry and Kwok will be permanently barred from serving as an officer or director of a public company.
The two also pleaded guilty to conspiracy to commit securities fraud in a criminal case also announced Monday. Both will be sentenced by the US District Court for the Southern District of New York. “Kwok and Shah played a game of you scratch my back and I’ll scratch yours,” said Scott W. Friestad, Associate Director in the SEC’s Division of Enforcement.