America
Two Indian Americans charged with $1.1 mn fraud
By
by Arun KumarWashington, April 4
Two Indian American
long-time friends have been charged with making over $1.1 million in
illegal profits from insider trading on news of a proposed acquisition
of Cooper Tire and Rubber Company by India-based Apollo Tyres Ltd.
In
a complaint filed in a US district court in Connecticut on Thursday, US
market regulator charged Massachusetts private equity investor Amit
Kanodia, and Iftikar Ahmed, a general partner at a venture capital firm
in Connecticut, with fraud.
The Securities and Exchange
Commission (SEC) named Rakitfi Holdings LLC, a company owned by Ahmed,
and Lincoln Charitable Foundation, a supposed charity operated by
Kanodia, as relief defendants, according to an SEC release.
The SEC is seeking to have the duo return their allegedly ill-gotten gains with interest and pay civil monetary penalties.
The US Attorney's Office for the District of Massachusetts announced parallel criminal charges against Kanodia and Ahmed.
The
SEC alleges that by April 2013, India-based Apollo Tyres was engaged in
serious negotiations to acquire Cooper Tire, of Findlay, Ohio.
Although
the acquisition was never completed, the complaint alleges that Cooper
Tire's stock price jumped 41 percent when the acquisition was announced
in June 2013.
The SEC alleges that Kanodia tipped Ahmed and
another friend prior to the acquisition announcement after learning of
the deal from his wife, then the general counsel at Apollo who was
intimately involved in Apollo's efforts to acquire Cooper Tire.
According
to the SEC's complaint, Kanodia shared the highly confidential
information with Ahmed who began buying significant amounts of Cooper
Tire stock and options.
Once news of the deal was public, Ahmed
immediately liquidated his Cooper Tire holdings, reaping more than $1.1
million of ill-gotten profits, according to the complaint.
Ahmed
later paid Kanodia a kickback by transferring $220,000 to Lincoln
Charitable Foundation, a supposed charity that Kanodia controlled and
used to mask the kickback, SEC alleged.
A second close friend of
Kanodia, identified in the complaint as Tippee 1, also profited by
trading on the confidential information provided by Kanodia and paid a
portion of his illicit gains to Kanodia using the same supposed charity,
it further alleged.
(Arun Kumar can be contacted at [email protected])