$1 Million Awarded to Southbury Whistleblowers

Update 2:48:  added details about submitted evidence, and divorce proceedings between Zilkha and Karen Kaiser.

A Southbury couple was awarded $1 million for information they provided in a case involving insider trading, the Securities and Exchange Commission (SEC) announced Friday.

This is the largest such award ever paid by the SEC.

Glen and Karen Kaiser turned over e-mails and other documents that led to an official SEC complaint against Pequot Capital Management, inc. in 2008.  Karen is the ex-wife of David Zilkha, also of Southbury, one of the defendants in the case.

The SEC's complaint against Pequot— a Wilton hedge fund — alleged insider trading of Microsoft securities between Pequot CEO Arthur Samberg and Zilkha, a Microsoft employee who came to work for Pequot in 2001.

Pequot, without admitting or denying allegations, agreed to pay $28 million to settle the charges in May and submit to injunctions.

The Kaisers accessed the documents and e-mails from a computer hard drive left in Karen's possession.

Court documents obtained through LexisNexis paint a violent relationship between Zilkha and Karen Kaiser.

A December 2004 ruling forbidding Zilkha child visitation rights during divorce proceedings found that without the intervention of a third party, "Mr. Zilkha would have physically harmed [Karen Kaiser] in the presence of her children."

The ruling also mentions that Zilkha was openly disdainful during the proceedings.

The SEC says that further financial information about Zilkha's arrangement with Samberg was disclosed during his 2004 divorce proceedings with Karen Kaiser.

The SEC's complaint lists some of the content of the e-mails the Kaisers submitted.  According to it, most of the evidence concerned an April 2001 e-mail conversation with Zilkha's Microsoft colleague Mark Spain, who worked in sales.

In an e-mail to Spain with the subject line "Any visibility on the recent quarter?" Zilkha wrote "Have you heard whether we will miss estimates?  Any other info?"

Spain responded that they would meet or exceed their expectations.

"march was the best march of record. made up the shortfall in us sub.  w2k pro major contributor.  on track for revised forecast" he wrote.

The complaint alleges that Zilkha gave information from that Spain e-mail to Samberg, who had just offered Zilkha a job and whose analysts had foreseen Microsoft underperforming.

Samberg would go on to buy stocks that would increase in value by almost $15 million after Microsoft announced their March earnings ten days later.  Samberg personally made $4 million.

According to an SEC order against David Zilkha, the man had been subpoenaed in 2005 to turn over all e-mails involving Microsoft, but kept the Spain e-mails secret.  It wasn't until the Kaisers turned over the e-mails in January 2009 that the SEC took action against Pequot and Zilkha.

Further financial information about Zilkha's arrangement with Samberg was disclosed during his 2004 divorce proceedings with Karen Kaiser, then Karen Zilkha.