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

Filing 213

CONSENT ORDER AND JUDGMENT # 11,1162 in favor of Securities and Exchange Commission against Gautham Shankar in the amount of $ 277,567.94. (Signed by Judge Jed S. Rakoff on 6/14/11) (Attachments: # 1 NOTICE OF RIGHT TO APPEAL)(ml)

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK

SECURITIES AND EXCHANGE COMMISSION,
Plaintiff,
~agaiDst-

GALLEON MANAGEMENT, LP,
RAJ RAJARATNAM,
RAJIVGOEL,
ANILKUMAR,
DANIELLE CHIESI,
MARK KURLAND,
ROBERT MOFFAT,
NEW CASTLE FUNDS LLC,
ROOMY KHAN,
DEEP SHAH,
ALlHARllU,
ZVlGOFFER,
DA VI» PLATE,
GAUTHAM SHANKAR,
SCHOTTENFELD GROUP LLC,
STEVEN FORTIJNA,
and
S2 CAPITAL MANAGEMENT, LP,

09 Civ. 8811 (JSR)

ECFCASE

Defendants.

CONSENT ORDER AND JUDGMENT AS TO DEFENDANT GAUTHAM SHANKAR

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 over Defendant and the subject matter ofthis
action; consented to entry oftbis Consent Order and Judgment ("Consent Order"); waived
findings offact and conclusions oflaw; and waived any right to appeal from this Consent Order:

I.
IT IS HEREBY ORDERED, ADruDGED, 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, directly or indirectly, Section
IO(b) of the Securities Exchange Act of 1934 (the "Exchange Act") [IS U.S.C. § 78j(b)] and
Rule IOb-5 promulgated thereunder [17 C.F.R. § 240.l0b-5], by using any means or
instrumentality of interstate 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 defraud;

(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 of the 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.

2

n.
IT IS HEREBY FURTHER ORDERED, ADnJDGED, 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 ofthis Consent Order by personal service or
otherwise are pennanendy restrained and enjoined from violating Section 17(a) of the Securities
Act of 1933 (the "Securities Acf') [15 U.S.C. § 77q(a)] in the offeror sale of any security by the
use ofany means or instruments of transportation or communication 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.

m.
IT IS FURTHER ORDERED, ADJUDGED, AND 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. In the event that an order of criminal forfeiture is entered
against Defendant in the criminal case before the United States District Court of the 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 two (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 Se~urities and Exchange Commission. The
payment shall be delivered or mailed to the Office ofFinancial Management, Securities and
Exchange Commission, Operations Center, 6432 General Green Way, Mail Stop 0-3, Alexandria,
Virginia 22312, and shall 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 ofthis
. Court; and specifying that payment is made pursuant to tbis Consent Order. A copy of the letter
shall be sent to counsel of record 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 determine no later than __(_:)..--'-..1'$_'

1-1_(_1_-" whether it is appropriate to

order a civil penalty pursuant to Section 20(d) of the Securities Act [15 U.S.C. § 77t(d)], Section
21A and/or 21 (d)(3) of the Exchange Act [15 U.S.C. §§ 78u(dX3), 78u-U and, if so, the amount
of the 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 chalJenge the validity of the Consent or this Consent Order; (c) solely for the
purposes ofsuch a detennination, the allegations of the Complaint shall be accepted as and
deemed true by the Court; and (d) the 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) of the Federal
Rules ofCivil 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 IS FURTHER ORDERED, ADJUDGED, AND DECREED that this Court shall retain
jurisdiction ofthis matter for the purposes of enforcing the terms of this Consent Order.

Dated:

J

··1'L--­
,
.

5

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK

SECURITIES AND EXCHANGE COMMISSION,
Plaintiff,

-againstGALLEON MANAGEMENT, LP,
RAJ RAJARATNAM.
RAJIVGOEL,
ANILKUMAR,
DANIELLE crnESI,
MARK KURLAND,
ROBERT MOFFAT,
NEW CASTLE FUNDS LLC,
ROOMY KHAN,
DEEP SHAH,

09 Civ. 8811 (JSR)

ECFCASE

ALIHARIRI,
ZVIGOFFER,
DAVID PLATE,
GAUmAM SHANKAR,
SCHOTTENFELD GROUP LLC,
STEVEN FORTUNA,
and

S2 CAPITAL MANAGEMENT, LP,
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 of this action.

3.

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

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

permanently restrains and enjoins Defendant from violations of Section
17(a) of the Securities Act of 1933 (the "Securities Act") [15 U.S.c. §
77q(a)], Section I O(b) of the Securities Exchange Act of 1934 (the
"Exchange Act") [15 U.S.C. § 78j(b)], and Rule IOb-5 promulgated
thereunder [17 C.F.R. § 240. IOb-5]; and

(b)

orders Defendant to pay disgorgement in the amount of $243, 105.59, plus
prejudgment interest thereon in the amount of$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 case before the
United States District Court of the Southern District of New York titled,
United States v. Gautham Shankar, 09-CR-00996, then Defendant's
disgorgement obligations, including all outstanding pre and post judgment
interest, will be credited dollar for dollar by the amount of the criminal
forfeiture order.

4.

Defendant agrees that the Court shall order disgorgement of ill-gotten gains and

prejudgment interest thereon. Defendant further agrees that the Court shaH detennine whether a
civil penalty pursuant to Section 2l(d)(3) and Section 21A of the Exchange Act [15 U.S.c. §§
78u(d)(3), 78u-I], and Section 20(d) of the Securities Act [15 U.S.c. § 77t(d)] is appropriate
and, if so, the amount of the penalty. Defendant further agrees that in connection with any such
determination on civil penalties: (a) Defendant will be precluded from arguing that he did not

2

violate the federal securities laws as alleged in the Complaint; (b) Defendant may not challenge
the validity of this Consent or the Consent Order; (c) solely for the purposes of such a
determination, the aHegations ofthe Complaint shall be accepted as and deemed true by the
Court; and (d) the Court may detennine the issues on the basis of affidavits, declarations,
excerpts of sworn deposition or investigative testimony, and documentary evidence, without
regard to the standards for summary judgment contained in Rule 56(c) of the Federal Rules of
Civil 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.
5.

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

reimbursement or indemnification from any source, including but not limited to payment made
pursuant to any insurance policy, with regard to any civil penalty amounts that Defendant pays
pursuant to a judgment, regardless of whether such penalty amounts or any part thereof are added
to a distribution fund or otherwise used for the benefit of investors. Defendant further agrees
that he shall not claim, assert, or apply for a tax deduction or tax credit with regard to any
federal, state, or local tax for any penalty amounts that Defendant pays pursuant to a judgment,
regardless of whether such penalty amounts or any part thereof are added to a distribution fund
or otherwise used for the benefit of investors. This paragraph does not apply 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 ofCiviI Procedure.
7.

Defendant waives the right, ifany, to ajury 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 threats,

offers, promises, or inducements of any kind have been made by the Commission or any
member, officer, employee, 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 fully set forth therein.

10.

Defendant will not oppose the enforcement ofthe Consent Order on the ground, if

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

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 terms and conditions. Defendant further agrees to provide counsel for the
Commission,

~ithin

thirty days after the ConsentOrder is filed with the Clerk of the Court, with

an affidiv1f~r declaration stating that Defendant has received and read a copy of the Consent
Order. (
12.

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

against Defendant in this civil proceeding. Defendant acknowledges that no promise or
representation has been made by the Commission or any member, officer, employee, agent, or
representative ofthe Commission with regard to any criminal liability that may haye arisen or
may arise from the facts underlying this action or immunity from any such criminal liability.
Defendant waives any claim of Double Jeopardy based upon the settlement of this 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

4

or state law and the rules and regulations of self-regulatory organizations, licensing boards, and
other regulatory organizations. Such collateral consequences include, but are not limited to, a
statutory disqualification with respect to membership or participation in, or association with a
member of, a self-regulatory organization. This statutory disqualification has consequences that
are separate from any sanction imposed in an administrative proceeding. In addition, in any
disciplinary proceeding before the Commission based on the entry of the injunction in this
action, Defendant understands that he shall not be permitted to contest the factual allegations of
the complaint in this action.
13.

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

to perm it a defendant or respondent to consent to a judgment or order that imposes a sanction
while denying the allegation in the complaint or order for proceedings." 17 C.F.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 complaint or
creating the impression that the complaint is without factual basis; and (ii) that upon the filing of
this Consent, Defendant 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 restore this action to its active docket.
Nothing in this Consent affects Defendant's: (i) testimonial obligations; (ii) right to take legal or
factual positions in litigation or other legal proceedings in which the Comm ission is not a party;
or (iii) right to 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 any official of the United States acting in his or

5

her official capacity, directly or indirectly,

reimbursement of attorney's fees or other fees,

expenses, or costs expended by Defendant to defend against this action. For these purposes,
Defendant agrees that Defendant is not the prevailing party in this action since the parties have
reached a good faith settlement.
15.

Defendant agrees to cooperate with the Commission in connection with this

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

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

Court for signature and entry without further notice.
17.

Defendant agrees that this Court shall retain jurisdiction over this matter for the

purpose ofenforcing the terms of the Consent Order.

Gautham Shankar
2011, --I.;'-'--'-:-----'f..t--"l~IF_~-f-:-'. a person known to me,
On f\\~
personally appeared before me and acknowledged
foregoing Consent.

1/ '

Commission expires:
fREDERICK I.. SOSINSKY

11\

~ PWlic. Stale of N_

Yon

r'\{)'I,S'b """'-4991653
Quolified In New York ~1N\t}!,
Com"'lnlon Exp''''' F.b. 3, W..LL.

Fr
iek L. Sosinsky. Esq.
45 Broadway, 30th Floor
New York, New York 10006·3007
Ph: [phone]
Attorney for Defendant Gautham Shankar

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