Busted! Lawyers Nabbed in SEC's Hedge Fund Probe

Zusha Elinson
The Recorder
November 09, 2009

The government's increasingly aggressive pursuit of insider trading at hedge funds caught several lawyers on Thursday—and a hedge fund manager with a J.D. from Santa Clara University's law school.

In New York, Ropes & Gray associate Arthur Cutillo was arrested along with two other lawyers and other traders in an insider trading ring that the government says netted $10 million. Authorities also charged 13 more individuals in the separate, widening Galleon Group insider trading probe, including Ali Far, the hedge fund manager who has a law degree.

Far, who earned his J.D. in 1997 from Santa Clara University School of Law in San Jose, appears not to have become a practicing lawyer. According to media reports, he was a top lieutenant to Raj Rajaratnam, the founder of the Galleon hedge fund who's at the center of the insider trading case that's ensnared top fund managers and tech executives across the country.

So Cooperative! Read the cooperation agreements filed by Ali Far (.pdf), Richard Choo-Beng Lee (.pdf) and Roomy Khan (.pdf).

Far went on to found Far & Lee and Spherix Capital, two hedge funds in San Jose, with business partner Richard Choo Beng Lee. The SEC claims the two traded in inside information with their funds: Far got inside tips from Ali Hariri, an executive at Atheros Communications in Santa Clara who's also been charged; Lee got inside tips about Google earnings announcements.

On Oct. 9, Lee, represented by San Francisco white-collar lawyer Jeffrey Bornstein of K&L Gates, agreed to cooperate with the government and plead guilty. On Oct. 13, Far, represented by New York lawyer Steven Kobre of Kobre & Kim, agreed to do the same. On Oct. 16, the government moved in, charging Rajaratnam, Galleon and executives from tech companies like Intel's Rajiv Goel, with a vast insider trading conspiracy that netted $20 million.

Far's lawyers did not return calls seeking comment. Bornstein said that his client "will continue to cooperate fully with the U.S. attorney's office."

Atherossaid Thursday that Hariri has been put on leave.

"Atheros learned today of allegations of federal securities law violations by Ali Hariri, a senior member of Atheros' carrier networking group, apparently in connection with the well-known Galleon matter," the company said in a prepared statement. "The company has launched an internal investigation, and placed Mr. Hariri on leave pending the results of that investigation and the unfolding legal proceedings."

Also on Thursday, the government finally confirmed that the main informant in the case is Roomy Khan, a wealthy Atherton hedge fund consultant who recently moved to Florida. Khan also agreed to plead guilty. She's represented by Stanislao German, a little-known New York lawyer.

Khan is accused of trading on inside information from Polycom, Google, Hilton and Kronos. She provided the information to Rajaratnam at Galleon and acted as an informant for the government.