Saturday, June 8, 2013

DealBook: Fund Manager Settles Case in Dell Insider Trading Ring

Dell's offices in Santa Clara, Calif.Paul Sakuma/Associated PressDell’s offices in Santa Clara, Calif.

In August 2008, in the midst of the financial crisis, a large bet that the shares of Dell would drop proved highly lucrative for a tight-knit group of traders. It has also proved to be bountiful for the government in its campaign to root out insider trading on Wall Street.

On Friday, Victor Dosti, a former portfolio manager at the Whittier Trust Company, settled a civil action brought by federal securities regulators who accused him of illegally trading Dell shares. He is the ninth person charged by the government related to the Dell trade.

Mr. Dosti and Whittier, a money manager based in South Pasadena, Calif., agreed to pay about $1.7 million to resolve the lawsuit, which was filed by the Securities and Exchange Commission in Federal District Court in Manhattan. The S.E.C. said that Whittier earned profits and avoided losses of about $725,000 by trading on illicit tips about Dell as well as the technology companies Nvidia and Wind River Systems.

The secret information was funneled to Mr. Dosti by Daniel Kuo, a former analyst at Whittier who pleaded guilty last year to criminal charges that he was part of the insider-trading scheme of traders, analysts and corporate insiders who earned about $70 million in profits by trading on secret information that came from inside Dell and other companies.

“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 S.E.C.’s regional office in New York, said in a statement.

Gary Lincenberg, a lawyer for Mr. Dosti, declined to comment. Robert Anello, a lawyer for Whittier, said that his client was glad to have the matter behind it and that “the conduct engaged in by two former employees is completely contrary to the core values of this organization.”

Two of the nine individuals tied to the Dell insider-trading ring are former employees of SAC Capital Advisors, the giant hedge fund that is at the center of the government’s investigation. Michael Steinberg, a longtime SAC trader, was charged as part of the ring that illegally traded Dell and Nvidia. His name first surfaced last fall, when Jon Horvath, a former SAC analyst, pleaded guilty to insider trading in the two technology stocks and said he shared the information with Mr. Steinberg.

Mr. Steinberg has pleaded not guilty and is scheduled to stand trial on Nov. 18.

Whittier fired Mr. Dosti, 49, last January after federal prosecutors first brought charges related to the Dell and Nvidia trades. Mr. Dosti, an Albanian immigrant, received an M.B.A. from the University of Chicago and worked at Northern Trust and Citigroup before joining Whittier about a decade ago.

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