They say success is the best revenge. Few know that better than Karen Kaiser, who walked away from her contentious divorce and custody battle with David Zilkha $1 million richer. In July, the Securities and Exchange Commission (SEC) awarded Kaiser a $1 million bounty for blowing the whistle on an insider-trading scheme at Connecticut hedge fund Pequot Capital Management, where her estranged spouse was a trader. During the divorce, Kaiser discovered some e-mails between Zilkha and his boss that revealed a scheme to profit from insider information about Microsoft. Kaiser turned the emails over to the SEC, which extracted a $28 million settlement from Pequot, forcing the firm to close its doors.
Kaiser received her payout under Section 21A(e) of the SEC Act, which provides that individuals who give the commission information about insider trading are entitled to receive up to
10 percent of any penalties the commission obtains. Kasier's $1 million payday broke records. In the 20 years before the Pequot settlement, the commission had paid out a total of only $160,000
But even companies with airtight compliance practices face an increased risk that their employees will be tempted to go to regulators. The money at stake is huge, and plaintiffs lawyers know it.