The indictment alleges that in 2006 and 2007, Whitman’s firm made $900,000 in illegal profits by trading Google and Polycom stocks using material, non-public information that Whitman himself acquired to make the trades.
Whitman is also charged with buying and selling Marvell Technology Group stock and options over roughly two years using insider information.
The indictment alleges that Whitman obtained his inside information from two sources, Karl Motey and Roomy Khan. Both Motey and Khan were instrumental in helping federal prosecutors convict Raj Rajaratnam, the former billionaire hedge fund manager and Galleon Group founder, of insider trading.
You can read the criminal insider trading and securities fraud allegations in Whitman’s indictment here:
In 2006 — more than a year before he allegedly acquired inside information on Marvell, Whitman had nothing but glowing things to say about the company when he was interviewed by Barrons for his stock pick recommendations. Guess which stock was one of Whitman’s picks:
“I love Marvell, it’s one of the finest technology companies of the last couple of decades,” Whitman says. “They get very little press. It’s run by three family members…They are very modest people, without any sense of arrogance. Let me tell you a little story. I went to meet them early in the morning one day, and it was about to rain. And they parked at the far end of the Marvell parking lot so their employees wouldn’t have to walk as much in the rain.”
Whitman is also accused of acquiring and using inside information that he obtained from Khan so that his firm could earn $900,000 on Polycom and Google stock trades.
According to an archived page of the company’s website, Douglas F. Whitman founded Whitman Capital “in 1994 as an investment advisory firm focusing on technology companies both in the public and private market.”