Two Bay Area men were sentenced to prison and ordered to repay a total of more than $3 million they made off insider trading schemes related to two pending acquisitions in 2020 and 2021 by Lumentum, a San Jose-based company that makes laser components for Apple mobile devices.
The sentencing announced this week by Damian Williams, U.S. Attorney for the Southern District of New York, followed guilty pleas by Srinivasa Kakkera, 48, of Pleasanton and Abbas Saeedi, 48, of Fremont resulting from the investigation of stock trading tied to the proposed acquisitions by Lumentum.
A Lumentum acquisition of a Pennsylvania firm, Coherent, in 2020 fell through, while Lumentum’s acquisition of Neophotonics of San Jose was finalized in 2021, prosecutors said
Prosecutors said that Kakkera, a former head of engineering and artificial intelligence for San Jose-based Adobe Inc., and Saeedi, owner of a tax preparation business, participated in illegal insider trading based on confidential information from a third co-defendant, Amit Bhardwaj, of San Ramon, who worked for Lumentum Holdings Inc.
Kakkera was sentenced by U.S. District Judge Gregory H. Woods to 18 months in prison, for insider trading, and ordered to forfeit $2,453,688.
Saeedi was sentenced to five months in prison for insider trading and ordered to pay $691,105.
Bhardwaj pleaded guilty and was previously sentenced to 24 months in prison and fined $975,000.
Another man charged in the Coherent scheme, Dhirenkumar Patel of Newark, gave a portion of the $423,000 he allegedly made in the insider trading scheme to Kakkera at Bhardwaj’s direction, according to prosecutors. Patel pleaded guilty in 2022 to three fraud charges and conspiracy to obstruct justice, and is set to be sentenced in New York federal court in March.
In a statement, Williams said: “Srinivasa Kakkera and Abbas Saeedi traded on valuable material, non-public information about Lumentum’s planned acquisitions, knowing that their friend had stolen this information from his employer, Lumentum.”
“Kakkera and Saeedi used their informational advantage to make millions in combined illegal gains in the stock market,” he said. “But insider trading is not easy money: if you try to illegally profit from material, non-public information, there’s a price to be paid.”
According to the allegations in the indictment and statements made in public court proceedings, in December 2020, Bhardwaj learned that Lumentum was considering acquiring Coherent, Inc. Based on this information, Bhardwaj purchased Coherent stock and call options, and Bhardwaj tipped three associates, including Saeedi, and these individuals all traded in Coherent securities as a result.
Also, in October 2021, prosecutors said Bhardwaj learned that Lumentum was engaged in confidential discussions with Neophotonics Corp. about a potential acquisition. Bhardwaj provided this information to Kakkera, Saeedi and Ramesh Chitor, and these individuals all traded in Neophotonics securities, according to prosecutors.
“Kakkera also caused other friends and family to purchase Neophotonics securities,” prosecutors said in a statement this week. “When Neophotonics’ stock price increased substantially following the announcement of the Lumentum acquisition in November 2021, Kakkera, Saeedi and Chitor closed their positions in Neophotonics securities and made collectively approximately $4.3 million in realized and unrealized profits.”
After they were interviewed by the FBI and served with federal grand jury subpoenas in March 2022, Bhardwaj, Kakkera and Saeedi attempted to hide their conduct. The men, according to prosecutors, “met in person on multiple occasions and discussed, among other things, 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.”
Williams praised the investigative work of the FBI and acknowledged the assistance of the Securities and Exchange Commission’s Securities and Commodities Fraud Task Force, which separately initiated civil proceedings against Kakkera and Saeedi.
Lumentum, with a market capitalization of nearly $3.4 billion, reported net losses of 21% and 16% for the most recent two quarters, respectively. The company makes solid-state lasers used in automobiles, solar cells and semiconductor chips, plus 3D sensing applications used in mobile devices and autonomous driving, including facial recognition sensors in IPhones and IPads.