United States Attorney
Southern District of New York
Monday, May 21, 2012
Yahoo! Executive and California Hedge Fund Portfolio Manager Plead Guilty in New York for Insider Trading
NEW YORK – Robert Kwok and Reema Shah pleaded guilty today in Manhattan federal court to one count of conspiracy to commit securities fraud in connection with an insider trading scheme in which Kwok, an executive with Yahoo!, provided material, non-public information to Shah, a portfolio manager at an asset management firm that managed billions of dollars in mutual funds and a hedge fund, concerning Yahoo!’s quarterly earnings and potential business transactions, announced Preet Bharara, U.S. Attorney for the Southern District of New York, and Janice K. Fedarcyk, Assistant Director-in-Charge of the New York Office of the FBI. Shah, who then executed trades in Yahoo!, also pleaded guilty to one count of securities fraud. Kwok pleaded guilty before U.S. District Judge Robert Patterson, and Shah pleaded guilty before U.S. District Judge John Koeltl.
According to the informations and statements made during today’s guilty plea proceedings:
From at least January 2008 through July 2009, Kwok provided material nonpublic information concerning Yahoo!’s quarterly earnings and potential business transactions with other companies (inside information) to Shah, who then executed trades based on the inside information. For example, in the spring and summer of 2009, Kwok provided Shah with inside information by telephone, and thereafter, in July 2009, Shah executed securities transactions based on that information.
In exchange for the Yahoo! inside information, Shah provided Kwok with information concerning potential business transactions of publicly-traded companies that Shah obtained, directly and indirectly, from other individuals. For instance, in early April 2008, Shah advised Kwok that Moldflow Corporation was going to be acquired. Thereafter, between April 7, 2008, and April 25, 2008, Kwok executed securities transactions based on that information.
Kwok, 36, of Danville, Calif., pleaded guilty to one count of conspiracy to commit securities fraud, which carries a maximum sentence of five years in prison, a maximum fine of $250,000, or twice the gross gain or loss from the offense, and a maximum period of three years of supervised release. As part of his plea agreement, Kwok has agreed to forfeit the proceeds he obtained as a result of the offense.
Shah, 40, of Menlo Park, Calif., pleaded guilty to one count of conspiracy to commit securities fraud and one count of securities fraud. The conspiracy count carries a maximum sentence of five years in prison, a maximum fine of $250,000, or twice the gross gain or loss from the offense, and a maximum period of three years of supervised release. The securities fraud count carries a maximum sentence of 20 years in prison and a maximum fine of $5 million, or twice the gross gain or loss from the offense, and a maximum period of three years of supervised release. As part of her plea agreement, Shah has also agreed to forfeit the proceeds she obtained as a result of the offense.
Kwok is scheduled to be sentenced by Judge Patterson on Sept. 18, 2012, at 4:00 p.m. Shah’s sentencing is scheduled for May 24, 2013, at 10:00 a.m.
U.S. Attorney Bharara praised the investigative work of the FBI. He also thanked the U.S. Securities and Exchange Commission for its assistance.
This case was brought in coordination with President Barack Obama’s Financial Fraud Enforcement Task Force, on which U.S. Attorney Bharara serves as a Co-Chair of the Securities and Commodities Fraud Working Group. President Obama established the interagency Financial Fraud Enforcement Task Force to wage an aggressive, coordinated and proactive effort to investigate and prosecute financial crimes. The task force includes representatives from a broad range of federal agencies, regulatory authorities, inspectors general, and state and local law enforcement who, working together, bring to bear a powerful array of criminal and civil enforcement resources. The task force is working to improve efforts across the federal executive branch, and with state and local partners, to investigate and prosecute significant financial crimes, ensure just and effective punishment for those who perpetrate financial crimes, combat discrimination in the lending and financial markets, and recover proceeds for victims of financial crimes.
This case is being handled by the U.S. Attorney’s Office for the Southern District of New York’s Securities and Commodities Fraud Task Force. Assistant U.S. Attorneys Jillian B. Berman and Reed Brodsky are in charge of the prosecution.