Pleasanton, Fremont men sentenced to prison over insider trading of tech stocks among friends [Bay Area News Group]

Two Bay Area men are going to prison for an insider-trading scheme among friends who traded illegally on tips from the former information-security chief at San Jose technology firm Lumentum.

Srinivasa Kakkera of Pleasanton, 48-year-old former Adobe head of engineering and artificial intelligence, was sentenced Wednesday to a year and a half in federal prison. Abbas Saeedi of Fremont, owner of a Newark tax preparation business, received a five-month sentence. The pair were among a group of friends who learned valuable, non-public information from former Lumentum chief information security officer Amit Bhardwaj of San Ramon, sentenced earlier to two months in prison for his role in the scheme.

“Kakkera and Saeedi used their informational advantage to make millions in combined illegal gains in the stock market,” the U.S. Department of Justice said in announcing the men’s sentences, which were handed down in Southern District of New York federal court.

According to the Justice Department, Bhardwaj in late 2020 learned that Lumentum, which makes laser- and optics-based hardware, was considering acquiring electronics and optics company Coherent. Bhardwaj, along with buying Coherent stock himself, tipped off three associates, including Saeedi, who “all traded in Coherent securities as a result,” the department said.

A July 2020 U.S. Securities and Exchange Commission charge against Bhardwaj, Kakkera, Saeedi and four other people alleged that after Coherent announced the deal, its stock price ballooned 29%, and one of the others charged, Dhirenkumar Patel of Newark, gave a portion of his $423,000 in ill-gotten gains to Kakkera at Bhardwaj’s direction. Patel pleaded guilty in 2022 to three fraud charges and conspiracy to obstruct justice, and is set to be sentenced March 26 in Southern District of New York federal court.

The SEC charge refers to Kakkera and Bhardwaj, and Saeed and Bhardwaj, as long-time friends, and says Saeed was Bhardwaj’s accountant.

Coherent had announced in January 2021 that Lumentum would acquire it in a $5.7 billion deal, but Lumentum announced two months later that Coherent pulled out of the merger.

The second insider-trading episode started in October 2021 when Bhardwaj found out Lumentum was in confidential talks to buy San Jose hardware firm NeoPhotonics, and told Kakkera, Saeedi and another friend, who subsequently “all traded in NeoPhotonics securities,” the department said. Kakkera spread the word to family and friends who also bought the stock, the department said. When NeoPhotonics stock price shot up after Lumentum announced it was buying it, Kakkera and Saeedi sold their holdings, with Kakkera making $2.5 million in gains and Saeedi making just under $700,000, according to the department.

That sale went through, and NeoPhotonics is now a subsidiary of Lumentum.

After the FBI questioned Bhardwaj, Kakkera and Saeedi, and they were served with federal grand jury subpoenas in March 2022, the trio “took steps to obstruct the federal investigation of their conduct,” the department said. The friends met in person several times and discussed “potential false stories that would conceal their insider-trading scheme as well as creating false documents to buttress lies regarding payments that were, in reality, related to the insider-trading scheme,” according to the department.

The July 2022 grand jury indictment against the men accused Kakkera of lying to the FBI, telling the agency he never talked with Bhardwaj about a deal between Lumentum and NeoPhotonics, and that the $100,000 he received from Patel was a loan. Kakkera and Patel also created a “fake promissory note” to back up that lie, according to the indictment.

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The court ordered that each forfeit their ill-gotten gains to the government.

The SEC charge resulted in an October order from the Southern District of New York federal court banning Saeed from acting as an officer or director of a publicly traded company. The court ordered Saeed to pay a fine, with the amount still to be determined.

The court on the same date also prohibited Patel from making misrepresentations or omissions in connection with buying or selling of stock.

Kakkera’s proceedings in the SEC case are ongoing.

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