A former Seligman and RiverSource PM just pled guilty to securities fraud and conspiracy, then settled separate insider trading accusations from the Securities and Exchange Commission SEC. Yesterday the regulatory agency revealed the settlement in the civil case and the plea in the criminal case yesterday.

The SEC's accusations stem from information former Yahoo! senior director Robert W. Kwok and former Riversource Investments PM Reema D. Shah were accused of sharing about an impending deal between Yahoo! and software giant Microsoft. The SEC claims Shah purchased more than 700,000 shares of Yahoo which she sold for profits of $398,000 based on this illegally obtained information.

A separate criminal case was announced by the US Attorney's Office for the Southern District of New York on the same day. Kwok pled guilty to conspiracy of commit securities fraud while Shah pled guilty to a primary and conspiracy charge.

The prosecutors alleged that Shah informed Kwok of insider information stating that Autodesk Inc. would be purchasing Moldflow Corporation. Kwok purchased and later sold for a profit 1500 shares of Moldflow.

A spokesman for Seligman, now an Ameriprise subsidiary merged in with Columbia, declined to comment on the situation to the Wall Steet Journal:

"Ms. Shah is a former employee who left Seligman more than year ago. We have strict policies that prohibit the use of nonpublic information," the spokesman told the Journal Monday.

He added that the mutual fund shop has cooperated fully with the investigation and isn't a target.

"Kwok and Shah played a game of you scratch my back and I'll scratch yours," stated Scott W. Friestad, associate director in the SEC's division of enforcement. "When corporate executives and mutual fund professionals misuse their access to confidential information, they undermine the integrity of our markets and violate the trust placed in them by investors." 

Edited by: Ben Geier


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