Insider Trading Probe Is Felt Beyond World Of Hedge Funds
A Morgan Stanley banker has become the first Wall Street banker publicly drawn into the Galleon investigation, after he was placed under investigation by prosecutors for allegedly leaking tips that were then passed on to Galleon hedge fund founder Raj Rajaratnam.
According to the Wall Street Journal, the banker is Kamal Ahmed, 42 years old, who has now been placed on leave by Morgan Stanley.
Ahmed is alleged to have provided someone - whose identity is unknown - with information about AMD's merger with ATI, who then provided that information to Raj Rajaratnam in 2006.
He's yet to be accused of any wrongdoing and it's unclear if he'll be charged.
According to the Wall Street Journal, the federal insider-trading probe is being felt beyond the world of hedge funds and "expert network" firms in New York and Silicon Valley.
Investors in some of the hedge funds involved are struggling to get information and decide whether to sell their positions.
Some pension funds said they are getting accustomed to bad news, since the financial crisis and more recent insider-trading cases.
"You have to be prepared for stuff like this. Sometimes the knives are falling and we get stabbed," said Joelle Mevi, the chief investment officer of New Mexico's Public Employees Retirement Association, in an interview shortly after November raids on hedge funds and expert networks.
As stated in the Wall Street Journal:
As part of the three-year investigation, U.S. officials are investigating whether consultants and employees for so-called expert-network firms, among others, illegally funneled nonpublic information to hedge funds and other firms. In exchange for a fee, expert-network firms connect investors looking for an information edge with employees at public companies.Melanie Rodier has worked as a print and broadcast journalist for over 10 years, covering business and finance, general news, and film trade news. Prior to joining Wall Street & Technology in April 2007, Melanie lived in Paris, where she worked for the International Herald ... View Full BioIn early December, Mr. Roblee, head of alternative investments at the Ohio pension system, and Jason Naber, investment officer for hedge funds there, went to New York and Connecticut and met with principals of Level Global and Diamondback in their offices.
A day before the meeting with Diamondback, its head of marketing and client services, Vickram David, told Mr. Naber during a phone call that the hedge fund principals' "won't be willing to answer a lot of detailed questions about compliance in the meeting tomorrow as they are still cooperating with the government and would not want to 'front run that process,' " Mr. Naber wrote in an email to Mr. Roblee summarizing the call, adding that Mr. David had suggested they could do a portfolio update.
In the Dec. 6 email, Mr. Roblee told Mr. Naber that a portfolio update wouldn't be good enough.
Mr. Roblee, in an interview, told the Journal that he found both meetings to be useful and that the managers were "up front" in terms of their response to the investigation.
So far, the Ohio fund hasn't sought to withdraw assets from Level Global or Diamondback, Mr. Roblee said. Nor have several other public pension funds, including New York State Common Retirement Fund, invested with both Diamondback and Level Global, and the New Jersey Division of Investment, invested with Level Global, spokesmen said.
Representatives at several funds say they have been talking to consultants, watching the news, and communicating with their boards as the investigation wears on.
Should a hedge fund or its executives be charged by civil or criminal authorities in the matter, that would likely prompt pension funds to seek to withdraw assets, according to people within the industry.
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