Equity Research Analyst Pleads GuiltyIn Manhattan Federal Court To Insider Trading Charges

Preet Bharara, the United States Attorney for the Southern District of New York, announced today that SANDEEP AGGARWAL, a former equity research analyst for a financial services firm located in San Francisco, California (“the Firm”), pled guilty today in Manhattan federal court to charges arising from his involvement in an insider trading scheme. The scheme involved the improper disclosure of material, nonpublic information (“Inside Information”) concerning a strategic partnership in internet search and advertising between Microsoft Corporation and Yahoo! Inc. (the “Partnership”). AGGARWAL was arrested in connection with this scheme on July 29, 2013, and he pled guilty today before U.S. Magistrate Judge Ronald L. Ellis, pursuant to a cooperation agreement.

According to the Superseding Information to which AGGARWAL pled guilty, statements made during today’s guilty plea proceeding and other court documents:

From April 2008 up through March 2010, AGGARWAL was a senior internet analyst at the Firm. The Inside Information concerning the Partnership originated from an executive in Microsoft’s internet search business (the “Microsoft Insider”), who was a friend of AGGARWAL. On various occasions between March 2009 and July 2009, AGGARWAL had discussions with the Microsoft Insider about the likelihood of the Partnership. During this same period, two senior sales executives at the Firm arranged meetings and telephone calls between AGGARWAL and the Firm’s clients. These meetings and calls were for the purpose of facilitating the transmission of information AGGARWAL learned about the status of the Partnership.

For example, on the evening of July 9, 2009, AGGARWAL learned from the Microsoft Insider that discussions about the Partnership had recommenced and that a transaction was likely within the next few weeks. The very next day, on July 10, AGGARWAL provided the Inside Information about the Partnership to the senior sales executives at the Firm, who then arranged for AGGARWAL to provide the Information to representatives of certain hedge fund clients of the Firm. One of the representatives to whom AGGARWAL provided the Information was Richard Lee, then a portfolio manager at S.A.C. Capital Advisors, L.P.

On July 10, 2009, following the conversations AGGARWAL had with hedge fund clients, the portfolios managed by certain portfolio managers of those clients, including Richard Lee, purchased shares of Yahoo securities. Following press reports confirming that a transaction between Microsoft and Yahoo could be announced within one week, the portfolios managed by certain of the portfolio managers, including Richard Lee, sold Yahoo stock and generated substantial profits.

AGGARWAL, 40, of Gurgon, India, pled 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 and a fine of the greater of $250,000, or twice the gross gain or loss from the offense. The securities fraud count carries a maximum sentence of 20 years in prison and a fine of the greater of $5,000,000, or twice the gross gain or loss from the offense. AGGARWAL will be sentenced on May 15, 2014 before United States District Judge Colleen McMahon.

Richard Lee pled guilty on July 23, 2013, to an Information charging him with one count of conspiracy and one count of securities fraud in connection with insider trading between April 2009 and 2010.

Mr. Bharara praised the investigative work of the FBI. He also thanked the U.S. Securities and Exchange Commission. He also noted that the investigation is continuing.

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. The task force was established to wage an aggressive, coordinated and proactive effort to investigate and prosecute financial crimes. With more than 20 federal agencies, 94 U.S. attorneys’ offices and state and local partners, it is the broadest coalition of law enforcement, investigatory and regulatory agencies ever assembled to combat fraud. Since its formation, the task force has made great strides in facilitating increased investigation and prosecution of financial crimes; enhancing coordination and cooperation among federal, state and local authorities; addressing discrimination in the lending and financial markets and conducting outreach to the public, victims, financial institutions and other organizations. Over the past three fiscal years, the Justice Department has filed nearly 10,000 financial fraud cases against nearly 15,000 defendants including more than 2,900 mortgage fraud defendants. For more information on the task force, please visit www.StopFraud.gov.

The case is being handled by the Office’s Securities and Commodities Fraud Task Force. Assistant U.S. Attorneys John J. O’Donnell and Arlo Devlin-Brown are in charge of the prosecution.