Pequot Whistle-Blowers Get $1 Million From SEC

A whistle-blower couple was awarded $1 million by the SEC for providing critical information in the alleged Pequot Capital Management insider trading case involving Microsoft securities.


You can bet Art Samberg is not inviting Glen and Karen Kaiser to Thanksgiving this year.

The whistle-blower couple was just awarded $1 million by the U.S. Securities and Exchange Commission for providing critical information and documents in the alleged insider trading case involving Microsoft securities, one-time hedge fund luminary Samberg and his firm Pequot Capital Management.

The regulator said this is the largest award paid by the SEC for information provided in connection with an insider trading case. And just think, the Kaisers didn’t even have to shell out a few bucks for a lottery ticket.

In making the announcement, the SEC pointed out that it had previously investigated alleged insider trading in Microsoft by Pequot, Samberg, and David E. Zilkha, a Microsoft employee who accepted a job offer at Pequot, but closed its investigation without action.

But, then that dreaded former spouse surfaced.

In late 2008, Karen Kaiser, the ex-wife of Zilkha, and her husband, Glen Kaiser, discovered what the SEC describes as key evidence that ultimately led to the filing of a settled enforcement action against Pequot and Samberg alleging they engaged in insider trading. The Kaisers provided the SEC a critical email communication between Zilkha and another Microsoft employee that was not turned over to the SEC in the first investigation, among other documents.


In late May, without admitting or denying the allegations in the SEC’s complaint, Pequot and Samberg consented to the entry of injunctions and orders requiring the payment of civil penalties totaling $10 million, as well as the payment of disgorgement and prejudgment interest totaling over $17 million. Pequot and Samberg also agreed to an order censuring Pequot and, subject to a limited carve-out, barring Samberg from association with an investment adviser.

The SEC explains it is permitted to grant an award of up to 10 percent of the penalties paid in a case to a person who provided information leading to the imposition of those penalties, but only in insider trading cases. That provision was repealed by the recently enacted Dodd-Frank Wall Street Reform and Consumer Protection Act, which authorizes the Commission to award bounties to parties who provide information leading to recovery of monetary sanctions in a broader range of cases, not limited to civil penalties recovered in insider trading cases.

On the same day the Commission filed the settled complaint against Pequot and Samberg, it also issued an order instituting administrative and cease-and-desist proceedings against Zilkha. That matter is pending before an SEC administrative law judge.