SEC charges former Akamai executive whose tips went to Rajaratnam

Fri Sep 20, 2013 2:54pm EDT
 
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By Jonathan Stempel

(Reuters) - A former Akamai Technologies Inc official agreed to pay over $145,000, and be banned from serving as a public company officer or director, to settle civil charges he provided illegal tips that were funneled to Raj Rajaratnam, the hedge fund manager imprisoned for insider trading.

The U.S. Securities and Exchange Commission said Kieran Taylor, a former Akamai senior director of marketing, illegally tipped lifelong family friend Danielle Chiesi, a hedge fund manager at New Castle Funds, about the Internet content delivery company's plan in July 2008 to lower its revenue forecast.

According to the SEC, Chiesi relayed what she learned to Rajaratnam, telling the Galleon Group LLC manager that Akamai was "going to guide down a lot," and also tipped Steven Fortuna, managing partner of S2 Capital Management LP.

The SEC said Chiesi, Fortuna and Rajaratnam shorted hundreds of thousands of Akamai shares, reaping about $9.9 million of illegal profit after Akamai issued its forecast on July 30, 2008 and its stock fell 25.3 percent the next day.

Meanwhile, Taylor sold his 2,500 Akamai shares before the decline, enabling the New York resident to avoid losses of $20,635, the SEC said.

Short-sellers sell borrowed stock, hoping they can buy the shares back later at a lower price and replenish their lenders.

"Taylor's willing misuse of information about Akamai's financial situation otherwise unknown to the rest of the investing public made him just another cog in the sprawling Rajaratnam insider trading machine," said Sanjay Wadhwa, senior associate director for enforcement in the SEC's New York office.

Jack Cinquegrana, a lawyer for Taylor, did not immediately respond to requests for comment.   Continued...

 
Galleon hedge fund founder Raj Rajaratnam departs Manhattan Federal Court after his sentencing in New York October 13, 2011. REUTERS/Lucas Jackson