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)
SBCURITIES AND EXCHANGB COMMISSION, )
)
Plaintiff, )
) Civil Action No.
v. )
)
PEQUOT CAPITAL MAIIAGEMENT, INC. ) JURY TRIAL
and ARTHUR J. SAMBERG, ) REQUESTED
)
Defendants. )
)
COMPLAINT
Plaintiff SecuritiesandExchangeCommission(the"Commission")alleges:
SUMMARY
wouldrise.
which were attributableto stakesheld by Pequotand Sambergin the funds andto certain
performanceand management
feesthey generated.
C.F.R.$ 240.10b-51.
Accordingly,the Commissionseeksthe following relief asto each
JURISDICTION
Exchange
Act [5 U.S.C.$$ 78u(e),78u-1
and 7&aal.Additionally,manyof the actsand
DefendantPequotis headquartered.
DEFENDANTS
since1998as an investmentadviser.
August 15,2000 until his departurefrom Microsoft, he was a productmanagerwithin its MSN
ticker symbol,"MSFT."
FACTS
SambereHires Zilkha
Pequot,reportingdirectly to Samberg.
high-techstock,
samestrikeprice. A call option givesthe buyeran optionto purchasefrom the seller 100shares
of stockat a strikeprice at anytime up until expiration. A put option givesthe buyeran option
April 2001,the belief of a numberof analystsat Pequotand elsewherewas that Microsoft would
views of Microsoft'searningsprospects,
Sambergsoldhis long position.
product.
added)(the"Tidbits Email").
(emphasis
Quarter.
26. In an email to one of the colleagues,Zilkha asked,"Any ideason how the quarter
headingof the email, Zill<haasked,"Any visibility on the recentquarter?" In the body of the
understanding,
basedon the email Zilk'hahad receivedfrom Spain,that Microsoft would meetor
were not managedby Samberg,but Sambergwas awareof the orders. Sambergthen sought
33. Zil?,hadidnot get backto Samberguntil the eveningof April 17,by which time
Samberg'slong Microsoftremainedsubstantial,
comprising21,000call options.
Case 3:10-cv-00831 Document 1 Filed 05/27/10 Page 8 of 14
that eveningwith an email statingthat he had "heardthat afternoonfrom the MSN finance
Samberg'srecommendation,
a friend of Samberg'spurchased300,000sharesof Microsoftstock.
announcement,
the Pequotfundsmanagedby Sambergowned21,000Microsoftcall optionsthat
would increase.
earningsper share.
centsfrom $68.04at the closeon April l9 to $69 at the closeon April 20.
Case 3:10-cv-00831 Document 1 Filed 05/27/10 Page 9 of 14
Samberg'srecommendation
on April l9 hadgainsof $372,060.
analysttelling him, "david zilkhajoins me Mondayfrom Microsoft. You might want to talk to
guy, david zill<ha,isin ct today. Checkhim out. He's alreadygot a greatp&l basedon his msft
;input."
analysts.Sambergrespondedwith an email stating,in part, "do not worry over every little thing
- just get to know the companiesyou listed,andtell me what to do with my msft position,which
Pequot,who stated,"I am sitting herewith 'the greatone' aka art [Samberg];who sayswe've
47. On or aboutSeptemb
er 25, 2001,Sambergtold ZilV'hathat Zilkha's employment
49. ZilV'ha'knew
that as a Microsoft employee,he had a duty to keepconfidentialall
informationto Samberg.
which Zilkha was subject,madeit clear thatZilkha could be held liable for tipping othersto
tradeon insideinformation:
Justas you may not tradein the stockof Microsoft when you know material
nonpublicinformation,you may not disclosesuchinformationto any third party
who thentradesin Microsoftstock. This is considered illegal"tipping" andyou
couldbe held liableevenif you yourselfdid not tradeany Microsoftshares.You
could alsobe held liableif you arefoundto haverecommended to anotherthat he
or shebuy or sell Microsoftstock,evenif you do not disclosethe material
nonpublicinformation.
10
Case 3:10-cv-00831 Document 1 Filed 05/27/10 Page 11 of 14
53. Sambergknew or was recklessin not knowing that when Zilkha providedhim
informationaboutMicrosoft'sThird Quarterearnings,Zill<hawas
doingso in breachof Zilkha's
criminalremedies.
ll
Case 3:10-cv-00831 Document 1 Filed 05/27/10 Page 12 of 14
CLAIM
240.1Ob-sl.
of PermanentInjunctionand OtherRelief:
Exchange
Act [15 U.S.C.$ 78j(b)]andRulel0b-5 thereunder
[7 C.F.R.$ 240.10b-5];
plus prejudgmentinterest;
Microsoftsecurities,
t2
Case 3:10-cv-00831 Document 1 Filed 05/27/10 Page 13 of 14
Sanctions
Act of 1984,codifiedat Section2lAof the Exchange
Act, asamended[15 U.S.C.$
78u-ll;
l3
Case 3:10-cv-00831 Document 1 Filed 05/27/10 Page 14 of 14
JURY DEMAND
Respectfullysubmitted,
SECURITIESAND EXCHANGE
COMMISSION,
By its attorneys,
Local Counsel:
Dated:May 27,2010
l4