Four Northern California residents are the targets of insider trading charges levied by the U.S. Securities and Exchange Commission after they allegedly reaped more than $12 million in illegal profits, mostly from trading shares of discount clothing chain Ross Stores.
The SEC alleged in a complaint filed Friday in San Francisco that Roshanlal Chaganlal, a former finance department director at Ross’ Dublin, Calif. headquarters, routinely supplied a friend, Saleem Khan, with insider tips concerning Ross’ financials between August 2009 and December 2012, when Ross fired Chaganlal. During that period, the SEC claims Khan was able to make trades ahead of the public release of Ross’ monthly financial results using his own brokerage account while also making trades using the accounts of his brother-in-law and another acquaintance.
Chaganlal was one of a handful of Ross employees to have access to the company’s confidential sales figures via an internal website, According to the complaint. None of the four defendants could be reached.
The SEC complaint alleges that Khan received money from Chaganlal to invest, and funneled around $130,000 in profits back to Chaganlal in a variety of ways, including writing cashier’s checks under Chaganlal’s wife’s name. Khan is also charged with tipping off two colleagues, Ranjan Mendonsa and Ammar Akbari, both of whom are also charged in the SEC complaint.
“Khan and Chaganlal took advantage of confidential company data to systematically trade in Ross securities and reap millions of dollars in profits.” said Jina L. Choi, the director of the SEC’s San Francisco office. “Even when insider traders try to conceal their profits and kickbacks by using other accounts and intermediaries, we’re committed to piecing together these widespread schemes and catching the perpetrators.”
Khan is alleged to have made about $5.4 million in profits in his own account, as well as $6 million in his brother’s account. Khan also allegedly made about $450,000 in illegal profits through separate trades involving shares of software company Taleo just before that company’s $1.9 billion purchase by Oracle, according to the SEC, which says Khan got advance knowledge of that deal from an insider at Oracle.
Mendonsa is alleged to have made roughly $800,000 in profits from the trades, while Akbari allegedly received about $2,000.
Update: A corporate spokeswoman sent Fortune the following statement on behalf of Ross Stores: “We have no tolerance for any activities involving the violation of insider trading laws. We have been cooperating fully with the SEC on this investigation. The individual named in the complaint as a Ross employee was terminated by the company in December 2012. We have no further comment as the SEC investigation is ongoing.”
