Hedge Fund Reports Insider Trading

Hewlett-Packard said that it won’t be able to go through with its offer on schedule, now that these allegations of impropriety surfaced about the deal.

Okumus alleges it lost $27 million by selling its Mercury shares before the announcement of the upcoming sale was made. The hedge fund sold the shares at $37.97 to $39.11. After the market closed on July 25, H-P unveiled its $52-a-share bid, which represented a 33 percent premium to Mercury Interactive’s closing price the day before the deal was announced.

The hedge fund has asked a New York state judge to order the release of names of any customers who bought some 2.4 million shares of Mercury from Okumus Capital in late July. Goldman Sachs served as the main adviser to Mercury Interactive in the transaction.

Okumus Capital is led by 36-year-old hedge fund manager Ahmet Okumus. Raised in Istanbul, Okumus comes from a wealthy Turkish family. He attended college in the U.S. and worked briefly for AG Edwards before going out on his own. In a 2003 profile, Forbes referred to Okumus as a “hedge-fund phenom,’’ noting that his oldest fund had an annualized return of 42%.

Technically, the filing isn’t a lawsuit, but he implication is that someone tipped off customers and others on Wall Street about the deal, making Okumus Capital an unwitting seller. Okumus must convince a judge there’s sufficient grounds to compel Goldman Sachs and Jefferies to turn over the names in a motion called an “order to show cause,”

“Insider trading is a difficult case to make,’’ says Ron Geffner, a partner with Sadis & Goldberg. “In most cases it requires a smoking gun. Either you have testimony from an involved party, witness or written correspondence.”