Another Analyst Charged

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Sandeep Aggarwal, a technology stock analyst who set up his own boutique, was charged yesterday with leaking secret news in 2009 about a joint venture between Microsoft and Yahoo to at least two hedge funds, including SAC. Prosecutors said that Aggarwal tipped off Richard Lee, a former SAC Capital employee who pleaded guilty to insider trading charges last week and is cooperating with the government.

Aggarwal worked at Microsoft in a strategy position giving him access to Microsoft’s accounting staff before joining Citigroup as an equity analyst in 2005.  After less than 2 years at Citi, Aggarwal went to Oppenheimer & Co as a VP and Senior Internet analyst.  He wasn’t at Oppenheimer a year before he was hired by Collins Stewart as a Managing Director in 2008.

Aggarwal is accused of passing inside information related to closely watched talks between Microsoft and Yahoo related to a search engine partnership. In 2009, he sent an e-mail to his money management clients: “We are hearing deal talks are starting again — had stopped entirely a few weeks ago but contacts noting that Yahoo back at the table.”

According to the complaint, Aggarwal obtained the information about the deal talks from a friend who worked in Microsoft’s Bing search engine unit.  In a recorded conversation, Aggarwal told Richard Lee and a Collins Stewart salesman that his “buddy” was a “senior guy” who had worked at Microsoft for a decade and had been “very, very accurate in the past in terms of … telling me what’s going on,” according to the complaint.

A trader at Millennium also received the same inside tip and immediately reported the questionable exchange to the firm’s compliance department, according to an article in the New York Times.  Millennium contacted Collins Stewart and informed the firm of Aggarwal’s dubious conduct.  Prosecutors said Aggarwal lied to Collins Stewart after being asked where he obtained his information, saying that his source was someone who had retired from Microsoft years ago.

Aggarwal left Collins Stewart after two years and joined Caris & Co. as a Managing Director in 2010.  He left Caris after a year to set up his own research boutique, DigitalRoute LLC.  The firm provided industry research on internet and e-commerce companies to financial and corporate clients.

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