Bounty Hunters: SEC Pays Record $1 Million for Inside Info in Insider Trading Case

WASHINGTON - The Securities & Exchange Commission is giving out $1 million for information provided in its insider trading case against Pequot Capital Management, Inc. - the biggest reward in agency history for such a case.

The money goes to Glen Kaiser and Karen Kaiser of Southbury, Conn. She’s the ex-wife of David Zilkha, a former Microsoft Corp. employee who had accepted a job at Pequot.

The SEC had previously investigated alleged insider trading in Microsoft securities by hedge fund adviser Pequot, its chief executive, Arthur Samberg, and Zilkha, but the investigation stalled and was closed without action.

That is, until the Kaisers in late 2008 uncovered what the SEC described as “key evidence,” including email communication between Zilkha and another Microsoft employee. The email was not turned over to the SEC in the first investigation.

Without admitting or denying the allegations in the SEC’s complaint, Pequot and Samberg in May 2010 agreed to pay civil penalties totaling $10 million, plus disgorgement and prejudgment interest totaling more than $17 million.

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.

The SEC approved the award pursuant to Section 21A(e) of the Securities Exchange Act of 1934, which authorizes the commission to grant an award of up to 10% of the penalties paid in an insider trading case to a person who provided information.