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Ex-analyst charged in insider-trading crackdown

Case is tied to indictment of hedge fund SAC

NEW YORK — Continuing a relentless campaign against insider trading, federal authorities on Tuesday announced criminal charges against a former stock research analyst in a case connected to last week’s indictment of the hedge fund SAC Capital Advisors.

Sandeep Aggarwal, a former technology analyst at Collins Stewart, a research firm that has since become part of Cannacord Genuity, was charged with leaking secret information about a venture between Microsoft and Yahoo to at least two hedge funds, including SAC.

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FBI agents arrested Aggarwal on Monday in San Jose, Calif.

The Securities and Exchange Commission brought a parallel civil action against Aggarwal, 40, who now lives in India. His lawyer, Sam Braverman, did not immediately respond to a request for comment.

The government said that on July 9, 2009, Aggarwal learned from a friend who worked at Microsoft that the software giant had resumed discussions with Yahoo about a long-rumored Web-search partnership. The next morning, according to court filings, Aggarwal’s firm sent an e-mail blast to clients: “we are hearing deal talks are starting again — had stopped entirely a few weeks ago but contacts noting that YHOO back at the table.”

But Aggarwal gave certain clients extra-special treatment, including Richard Lee, then a portfolio manager at SAC, prosecutors allege.

Later on July 9, the two had a conversation — caught on a government wiretap — in which Aggarwal told Lee that he had a close friend who worked at Microsoft, and that Aggarwal’s friend had informed him that Yahoo and Microsoft’s negotiations concerning the formation of an Internet search partnership were moving forward. He told him the deal could happen in the following two weeks.

Lee thanked Aggarwal for the “very specific information,” the government said, and proceeded to buy several hundred thousand shares of Yahoo stock for SAC, as well as a large position in his personal account.

This spring, authorities confronted Lee with the incriminating wiretap evidence and persuaded him to cooperate in the government’s investigation of SAC.

He pleaded guilty to insider trading charges last week.

“Richard Lee has accepted responsibility for his prior conduct,” Lee’s lawyer, Richard D. Owens of Latham & Watkins, said last week.

Lee, 34, proved crucial to the strength of the government’s criminal case against SAC, not so much because of the Yahoo trading, but because of how he landed a job at SAC. Despite a warning that Lee was part of an “insider trading group” at a previous employer and overruling objections from his own legal department, Steven A. Cohen, the billionaire owner of SAC, hired Lee, prosecutors said.

The earlier employer was Citadel, a large fund based in Chicago. Citadel, which has not been accused of wrongdoing, said “it does not have, and never has had, an ‘insider trading group.’ ”

As for Aggarwal, prosecutors said that he not only leaked the secret deal information to SAC and another client, but lied to his bosses at Collins Stewart.

When asked where he obtained the information about the resumption of the Yahoo-Microsoft deal talks, he lied that his source was someone who had retired from Microsoft years ago.

Aggarwal now has his own research firm, DigitalRoute, which focuses on the Internet and the digital economy. He frequently gives interviews to print and broadcast media about technology stocks, appearing on CNBC as recently as 2011.

On his website, Aggarwal said he lives with his wife and two boys and splits his time between Silicon Valley and New Delhi. He also “enjoys playing squash as a stress buster.”

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