Dublin Man Pleads Guilty To Insider Trading Charges In Relation To Securities Of Ross Stores, Inc.
Defendant Admitted to Making Profits in Excess of $3.5 Million
OAKLAND – Saleem Khan pleaded guilty in federal court in Oakland today to conspiracy and securities fraud charges arising from an insider trading scheme in which he obtained and traded on material, non-public information, announced United States Attorney David L. Anderson and Federal Bureau of Investigation Special Agent in Charge John F. Bennett. The plea was accepted by the Honorable Haywood S. Gilliam, Jr., United Stated District Judge.
In pleading guilty, Khan, 54, of Dublin, admitted that during the period July 2009 to October 2012, he obtained material, non-public information relating the sales and financial performance of Ross Stores, Inc. (“Ross”), a discount-clothing retailer then headquartered in Pleasanton, Calif., from a friend who worked in Ross’s finance department. Based on this material, non-public information, Khan entered into options contracts regarding Ross securities in advance of Ross’s monthly sales announcements in brokerage accounts held both in his name and in nominee names. These transactions included at least nine “call” option transactions that occurred between October 2011 and August 2012. In his plea agreement, Khan admitted he provided pecuniary benefits to the Ross “tipper,” including by providing $130,000 to the tipper through third parties and by purchasing items on the tipper’s behalf. Khan admitted he made profits in excess of $3,500,000 as a result of the scheme.
On November 2, 2017, federal grand jury returned a superseding indictment against Khan charging him with one count of conspiracy to commit securities fraud, in violation of 18 U.S.C. § 1349; nine counts of securities fraud, in violation of 18 U.S.C. § 1348; and one count of obstruction of justice, in violation of 18 U.S.C. § 1505. Khan pleaded guilty to the conspiracy and securities fraud counts. If Khan complies with the terms of the plea agreement, the remaining count will be dismissed at his sentencing.
Khan was previously sued in a civil case by the Securities and Exchange Commission (SEC), Securities and Exchange Commission v. Saleem Khan et al., Civil Action No. 3:14-cv-02743 HSG (N.D. Cal., filed June 13, 2014), pertaining to the same insider-trading scheme. In September 2016, the court entered a final judgment against Khan ordering him to pay more than $15 million in disgorgement, penalties, and prejudgment interest. In that case, Khan agreed to settle the charges against him without admitting or denying the allegations in the civil complaint, and he consented to the entry of final judgment.
Khan’s sentencing hearing is scheduled for June 24, 2019, before Judge Gilliam in Oakland. The maximum statutory penalty for each count in violation of 18 U.S.C. §§ 1348 and 1349 is 25 years’ imprisonment and a fine of $250,000, plus restitution and forfeiture, if appropriate. However, any sentence will be imposed by the court only after consideration of the U.S. Sentencing Guidelines and the federal statute governing the imposition of a sentence, 18 U.S.C. § 3553.
Assistant U.S. Attorneys Kyle F. Waldinger and Matthew L. McCarthy are prosecuting the case with the assistance of Hector Lopez and Bridget Kilkenny. The criminal prosecution is the result of an investigation by the Federal Bureau of Investigation. In addition, substantial cooperation and assistance was provided by the San Francisco Regional Office and the Market Abuse Unit of the SEC. The government also appreciates the cooperation and assistance of the Financial Industry Regulatory Authority, Inc., Criminal Prosecution Assistance Group.