Securities and Exchange Commission v. Galleon Management, LP et al

Filing 206

CONSENT ORDER AND JUDGMENT AS TO DEFENDANT GAUTHAM SHANKAR #11,1063 in favor of Securities and Exchange Commission against Gautham Shankar in the amount of $ 277,567.94. (Signed by Judge Jed S. Rakoff on 6/7/11) (Attachments: # 1 Notice of Right to Appeal)(dt)

UNITED STATES DJSTRICT COURT
SOUTHERN DISTRICT OF NEW YORK

SECURITIES Al\'".O EXCHANGE COMl\1ISSION,
Plaintiff,
-against-

GALLEON MAt~AGEMENT, LP,
RAJ RAJAl~TNAM,
R4.JIV GOEL,

M"'IL KUMAR,

09 Gv. 8811 (JSR)

DMTELLE CHIESI.
MARK KURLAl"'D,

ECFCASE

ROBERT MOFFAT,
NEW CASTLE Ji1J1''1)S LLC,
ROOMY KHAN,
DEEP SHAH,
ALlHARIRI,
ZVIGOFFER,
DAVID PLATE,
GAUTHAM SHA.'iKAR,
SCHOTTENFELD GROUP LLC,
STEVEN FORTUNA,
and
S2 CAPITAL MANAGE:MENT, LP,
Defendants.

CONSENT ORDER AND JUDGMENT AS TO DEFENDANT GAUTHAM SllANKAR
The Securities and Exchange Commission having filed a Second Amended Complaint
("Complaint") and Defendant Gautham Shankar (,'Defendant") having entered a general
appearance; agreed that the Court has jurisdiction aver Defendant and the subject matter of this
action; consented to entry of this Consent Order and Judgment ("Consent Order"); waived
findings of fact and conclusions of law; and waived any right to appeal from this Consent Order:

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[r IS HEREBY ORDeRED, ADJUDGED, AND DECREED that Defendant and
Defendant' s a~ents> servants, employees, attorneys, and all persons in acti ve concert or
participation with them who receive actual notice of this Consent Order by personal service or
otherwise are permanently restrained and enjoined from violating, directly or indirectly~ Section
IO(b) ofthe Securities Exchange Act of 1934 (the "Exchange Act") (I5 U.S.C. § 78j(b)] and
Rule lOb-5 promulgated thereunder [17 C.F.R. § 240.l0b-5), by using any means or
instrumentality of interstale commerce, or of the mails, or of any facility of any national
securities exchange, in connection with the purchase or sale of any security;
(a)

to employ any device, scheme, or artifice to dcfraud;

(b)

to make any untrue statement of a material fact or to omit to state a material fact
necessary in order to make the statements made, in the light ofthe circumstances
under which they were made, not misleading; or

(c)

to engage in any act, practice, or course of business which operates or would
operate as a fraud or deceit upon any person.

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IT.

IT IS HEREBY FURTHER ORDERED, ADJUDGED, AND DECREED that Defendant
and Defendant's agents, servants, employees, attorneys, and all persons in active concert or
participation with them who receive actual notice of this Consent Order by personal service or
otherWise are permanently restrained and enjoined from violating Section 17(a) of the Securities
Act of 1933 (the "Securities Act") [15 V.S.c. § 77q(a)] in the offer or sale of any security by the
use of any means or instruments of transportation or conununication in interstate commerce or by
use of the mails, directly or indirectly:
(a)

to employ any device, scheme, or artifice to defraud;

(b)

to obtain money or property by means of any untrue statement of a material fact
or any omission of a material fact necessary in order to make the statements
made, in light ofthe circumstances under which they were made, not misleading;
or

(c)

to engage in any transaction, practice, or course of business which operates or
would operate as a fraud or deceit upon the purchaser.

ID.
IT IS FlJRTHER ORDERED, ADJUDGED, At"ID DECREED that Defendant is liable
for $243,105.59, representing profits gained and/or losses avoided as a result of the conduct
alleged in the Complaint, together with prejudgment interest thereon in the amount of
$34,462.35, for a total of$277>567.94. Tn the eyent that an order of criminal forfeiture is entered
against Defendant in the criminal case before the United States District Court ofthe Southern
District of New York titled, United States v. Gautham Shankar, 09-CR-00996, then Defendant's

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monetary obligations, including all outstanding pre and post judgment interest, will be credited
dollar for dollar by the amount ofthe criminal forfeiture order. The monetary obligations
ordered by this Consent Order shall become due thirty (30) days after entry of the Judgment of
Conviction in the criminal case, or n"\'o (2) years from the date of the entry of this Consent Order,
whichever comes first. Defendant shall pay the monetary obligations ordered by this Consent
Order (minus any amount ordered in criminal forfeiture) by certified check, bank cashier's check,
or United States postal money order payable to the Sc?urities and Exchange Commission. The
pa}ment shall be delivered or mailed to the Office of Financial Management, Securities and
Exchange Commission, Operations Center, 6432 General Green Way, Mail Stop 0-3, Alexandria,
Virginia 22312, and shan be accompanied by a letter identifying Defendant's name as defendant

in this action; setting forth the title and civil action number of this action and the name of this
Court; and specifYing that payment is made pursuant to this Consent Order. A copy of the letter
shall be sent to counsel ofrecord for the Commission in this action. The Commission shall remit
the funds paid pursuant to this paragraph to the United States Treasury. Defendant shall provide
counsel of record for the Commission with a copy of the Judgment of Conviction in the criminal
action within :five (5) days of its entry.
IV.

/

The Court shall detennine no later than _1..l(;)L.f--!3..t./'-/f-1/+...t-1_ _> whether it is appropriate to
order a civil penalty pursuant to Section 20(d) ofthe Securities Act [15 U.S.C. § 77t(d)], Section
21A andlor 21(d)(3) of the Exchange Act (15 USc. §§ 78u(d)(3), 78u-l] and, ifso, the amount
ofthe penalty. In connection with such a determination: (a) Defendant will be precluded from
arguing that he did not violate the federal securities laws as alleged in the Complaint; (b)
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Defendant may not challenge the val idity of the Consent or this Consent Order; (c) solely tor the
purposes of such a determination, the allegations of the Complaint shall be accepted as and
deemed true by the Court; and (d) lhe Court may detennine the issues on the basis ofaffidavits,
declarations, excerpts of sworn deposition or investigative testimony, and documentary evidence,
without regard to the standards for summary judgment contained in Rule 56(c) ofthe Federal
Rules ofCiviJ Procedure. In connection with such a determinatIon, the parties may take
discovery, including discovery from appropriate non-parties, but only as expressly approved by
the Court.

v.
IT IS FURTHER ORDERED, ADJUDGED, AND DECREED that the Consent is
incorporated herein with the same force and effect as if fully set forth herein, and that Defendant
shall comply with all of the undertakings and agreements set forth therein.
VI.

IT lS FURTHER ORDERED, ADJUDGED, AND DECREED that this Court shall retain
jurisdiction of this matter for the purposes of enforcing the terms ofthis Consent Order.

Dated:

,(7/JL
I

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UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
SECURITIES A:l\ro EXCHANGE COMlVIISSION,

Plaintiff,
-againstGALLEON MANAGEMENT. LP,
RAJ RAJAH....L\.TN.-\M.

RAJIVGOEL,
ANIL KUMAR,
DAl'I"lELLE CHIESI,
MARK KIJRLAND t
ROBERT MOFFAT,
NEW CASTLE FUNDS LLC,
ROOJ\t1Y KHAN,
DEEP SllAH,
ALI lLo\R.IRI,
ZVI GOFFER,
DAVID PLATE,
GAUTHAM SHANKAR,
SCHOTTENFELD GROUP LLC,
STEVEN FORTUNA,
and
S2 CAPITAL MANAGEMENT, LP,

09 Civ. 88] 1 (JSR)
ECFCASE

Defendants,

CONSENT OF DEFENDANT GAUTHAM SHANKAR
1.

Defendant Gautham Shankar ("Defendant") acknowledges having been served

with the Second Amended Complaint ("Complaint") in this action and enters a general
appearance.
2.

Defendant agrees the Court has jurisdiction over Defendant and over the subject

matter ofthis action.

3.

Defendant hereby consents to the entry of the Consent Order and Judgment in the

fonn attached hereto (the "Con~ent Order") and incorporated by reference herein, which, among
other things:
(a)

permanently restrains and enjoins Defendant trom violations of Section
17(a) of the Securities Aet ofl933 (the

"Securitj~s

Act") [15 V.S.c. §

77g(a)l. Section 1O(b) of the Securities Exchange Act of 1934 (the
"Exchangt: Act") [15 U.S.C. § 78j(b)], and Rule 10b-5 promulgated
thc:rcundc:r [17 C.F.R. § 240.10b-5]; and
(b)

orders Defendant to pay disgorgement in the amount ofS243, I 05.59, plus
prejudgment interest thereon in the amount 0[$34,462.35, for a total of
$277,567.94, but provides that in the event that an order of criminal
forfeiture is entered against Defendant in the criminal ease before the
United States District Court ofthc Southern District of New York titled,
United States v. Gautham Shankar, 09-CR-00996, then Defendant's
disgorgcmcnt obligations, including all outstanding pre and post judgment
interest, will be credited dollar for dollar by the amount of the criminal
forfeiture order.

4.

Dd~ndant af,'Tccs

that the Court shall order disgorgement of i II-gotten gains and

prejudgment interest thereon. Defendant further agrees that the Court shall determine whether a
civil penalty pursuanl10 Section 21(d)(3) and Section 21 A of the Exchang~ Act [15 V.S.c. §§
7Su(d)(3), 78u-l]. and Section 20(d) oflhe Securities Act [15 U.S.C. § 77t(d)] is appropriate
and, if so, the amount of the penalty. Defendant further agrees thaI in cOMcetion with any such
determination on civil penalties: (a) Defendant wiil be precluded from arguing that he did not

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violate the federal securities laws as alleged in the Complaint; (b) Defendanl may not challcngc
the validity of this Consent or the Consent Order; (c) solely for the purposes of such

it

determination, the allegations of the Complaint shall be accepted as and deemed true by the
Court; and (d) the Cou.rt may determine the issues on the basis of affidavits, declarations,
excerpts of sworn deposilion or investigative teslimony, and documentary evidence, without
regard to the standards for summary judgment contained in Rule 56(c) of the Federal Rules of
Civil Procedurc In connection "yith sueh a detennination, the parties may take discovery,
including discovery from appropriate non-parties, but only as expressly approved by the Court.

5.

Defendant agrees that he shall not seek or accept, directly or indirectly,

reimbursement or indemnitication from any source, including but not limited 10 payment made

pursuant to any imurance policy, with n;gard to any civil penalty amounts that Defendant pays
pursuant to a judgment, regardless of whether such penalty amounts or any part thereof are added
10

a distribution fund or othervvise used for the benefit of inve:;tors. Defendant further agrees

that he shall not claim,

as~erl,

or apply for a lax deduction or tax credil wilh regard to any

federal, state, or local tax for any penalty amounts that Defendant pays pursuant to ajudgment,
regardless of whether such penalty amounts or any pan thereof are added to a distribution fund
or otherwise used for the benefit of investors. This paragraph does not C\pply to any
disgorgement amounts that Defendant pays.

6.

Defendant waives the entry of findings of fact and conclusions of law pursuant to

Rule 52 of the Federal Rules of Civil Procedure.

7.

Detendant waives the right, if any, to a jury trial and to appeal from the entry of

the Consent Order.

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8.

Defendant enters into this Consent voluntarily and represent that no threab,

offers, promises, or inducements of an)' kind have been made by the Commission or any
memb(;'T, officer,

employ~c,

agent, or representative of the Commission to induce Defendant to

enter into this Consent
9.

Defendant agrees that this Consent shall be incorporated into the Consent Order

with the same force and effect as if flilly set forth therein.
10.

Defendant will nol oppose lhe enforcement ofthe Consent Order on the ground, if

any exists, that it fails to comply with Rule 65(d) of the Federal Rules of Civii Procedure, and
hereby waives any objection based thereon.
J 1.

Defendant waives service of the Consent Order and agrees that entry of the

Consent Order by the Court and filing with the Clerk of the Court will constitute notice to
Defendant of its tenns and conditions. Defendant further agrees to provide counsel for the
Commission, within thirty days after the Consent Order is fi.led with the Clerk of the Court, with
an affidavit or declaration stating that Defendant has received and read a copy of the Consent
Order.
12.

Consistent with 17 C.F.R. 202.5(t), this Consent resolves only the claims asserted

against Defendant in this dvil proceeding. Defendant acknowledges that no promise or
representation has been made by the Commission or any member, officer, employee, agent, or
representative of the Commission with regard to any criminal liability that may haye arisen or
may arise fi·om the facts underlying this action or immunity from any sltch criminal liability.
Defendant waives any claim of Double Jeopardy based upon the settlement ofthis proceeding,
including the imposition of any remedy or civil penalty herein. Defendant further acknowledges
that the Court's entry of a permanent injunction may have collateral consequences under federal

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or slate law and the rules and regulations of self-regulatory organizations, licen.:;ing boards, and
othl;:r regulatory organizations Such collateral consequences include, but are not limited to, a
staturory disgualification with respect to membership or panicipation in, or association with a
member of, a self-regillatory organization. This statutory disqualification has consequences that
are separate trom any sanction imposed in an administrative proceeding. In addition, in any
disciplinary proceeding before tile Commission based on the entry of the injunction in this
action, Defendant understands that he shall not be pennitted to contest the factual allegations of
lhe complaint in this action.

13.

Defendant understands and agrees to comply with the Commission's policy "not

to pem1il a defendant Or respOndl;:nl to consent to a judgmcnt or order that imposes a sanction
while denying the allegation in the complaint or order for proceedings." 17 C.P.R. § 202.5. In
compliance with this policy, Defendant agrees: (i) not to take any action or to make or permit to
be made any public statement denying, directly or indirectly, any allegation in the complainr or
creating the impression that the complainl is without factual basis; and (ii) that upon the filing of
this Consenl, Defemlanl hereby withdraw any papers filed in this action to the extent that they
deny any allegation in the complaint. If Defendant breaches this agreement, the Commission
may petition the Court to vacate the Consent Order and re!>lore this action to its active docket.
Nothing in this Coment affects Defendant'S: (i) testimonial obligations; (ii) right to take legal or
factual positions in litigation or other legal proceedings in which the Commission is not a party;
or (iii) right lo assert his Fifth Amendment rights in this and in related proceedings.

14.

Defendant hereby waives any rights under the Equal Access to Justice Act the

Small Business Regulatory Enforcement Fairness Act of 1996, or any other provision of law to
seek from the United States, or any agency, or an)' official of the United Stl:\tes actIng in his or

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her official capacity. directly or indireclly, reimbursement of attorney's fec5 or other fees,
expenses, or costs expended by Defendant to ddend against lhis action. For these purposes,
Defendant agrees that Dltrendanl is nOllne prevailing party in this aClion since the parties have

reached a good faith settlement.
Defendant agrees to cooperate with the Commission in connection with this

15.

action and any related investigation by the Commission staff. The CQmmi~sion shall not require
cooperation from Defendant that is inconsistent with his obligations under existing agreements
he has entered Into with other Government agencies.
16.

Defendanl agrees that the Commission may present the Consent Order to the

Court [or signalure and entry without further notice.
Defendant agrees that this COllrt shall retain jurisdiction over lhis matter for the

17.

purpose of enforcing the tem1S o[the Consent Order.

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Dated:

Gautham Shankar

MJA I, (

On

,2011,

-..o....:...:----4t-...:r-..:...y...--I-~' a person known to me,

personally appeared before me and acknowledged

1

foregoing Consent.

Commission expires:

A~rvc

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F

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fREDERJeK L SOSINSKY

~ PuIalrc, SIC19 01 N_ YQfk
I"'l.il'L Y'O ~.49916S3
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Quolifi.d in Now York C~!l.1).,
Commi£ion Expires Fub. 3, -4'P...LL

~OSin~\

45 Broadway, 30 th Floor
New York, Ncw York 10006-3007
Ph: [phone]
Attorney tor Defendant Gautham Shankar

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