By Jonathan Stempel
(Reuters) - U.S. authorities have filed criminal and civil insider trading charges against two friends, including a Connecticut venture capital executive, accused of profiting illegally from India-based Apollo Tyres Ltd's
Iftikar Ahmed, a general partner of Oak Investment Partners in Greenwich, Connecticut, and his longtime friend Amit Kanodia were each charged on Thursday with one criminal count of securities fraud. The U.S. Securities and Exchange Commission filed related civil charges.
Authorities allege Kanodia, of Brookline, Massachusetts, learned details about the proposed merger between Apollo and Cooper Tire from his wife, who was Apollo's general counsel at the time, more than two months before the merger was announced.
Kanodia began tipping Ahmed and another friend, who together made more than $1.1 million of illegal profit by trading Cooper Tire shares and call options, according to court papers.
Ahmed and the friend then kicked back some profit to Kanodia, including $220,000 that Ahmed transferred to a supposed charity used by Kanodia to mask the kickback, authorities said.
"Trading on insider information is fraud, plain and simple," U.S. Attorney Carmen Ortiz in Boston said in a statement.
Martin Weinberg, a lawyer for Kanodia, in a phone interview said his client will plead not guilty and "strongly asserts his innocence."
A lawyer for Ahmed could not immediately be reached. An Oak spokesman said Ahmed has been put on a leave of absence.
"Mr. Ahmed's alleged conduct has absolutely no connection to Oak Investment Partners or any of its portfolio companies," the spokesman said. "These allegations, which have just come to our attention, run counter to our culture."
Apollo, Cooper Tire, Oak and Kanodia's wife were not charged.
The SEC said Ahmed is a graduate of the Indian Institute of Technology in New Delhi and Harvard Business School, while Kanodia received degrees from the University of Massachusetts.
Cooper Tire shares rose 41.1 percent on June 12, 2013, after Apollo agreed to buy the Findlay, Ohio-based company for about $2.5 billion. The merger was abandoned that December amid an acrimonious legal battle between the companies.
Ahmed and Kanodia each face a maximum 20 years in prison plus a $5 million fine in the criminal case. Insider trading sentences are typically less severe than the maximums.
The cases are U.S. v. Kanodia et al, U.S. District Court, District of Massachusetts, No. 15-mj-02062; and SEC v. Kanodia et al, U.S. District Court, District of Connecticut, No. 15-00479.
(Reporting by Jonathan Stempel in New York; Editing by Alan Crosby and Ted Botha)
