Free Declaration in Support - District Court of California - California

Case 3:07-cv-06198-MHP

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HOWARD RICE NEMEROVSKI CANADY FALK & RABKIN

GILBERT R. SEROTA (No. 75305) Email: [email protected] MARK A. SHEFT (No. 183732) Email: [email protected] MICHAEL L. GALLO (No. 220552) Email: [email protected] HOWARD RICE NEMEROVSKI CANADY FALK & RABKIN A Professional Corporation Three Embarcadero Center, 7th Floor San Francisco, California 94111-4024 Telephone: 415/434-1600 Facsimile .415/217-5910 Attorneys for Plaintiffs THOMAS WEISEL PARTNERS LLC and THOMAS WEISEL INTERNATIONAL PRIVATE LIMITED UNITED STATES DISTRICT COURT NORTHERN DISTRICT OF CALIFORNIA SAN FRANCISCO DIVISION

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THOMAS WEISEL PARTNERS LLC, a Delaware limited liability company, and THOMAS WEISEL INTERNATIONAL PRIVATE LIMITED, an Indian company, Plaintiffs, V. BNP PARIBAS, a French corporation, BNP PARIBAS SECURITIES (ASIA) LIMITED, a Hong Kong company, and PRAVEEN CHAKRAVARTY, an individual, Defendants.

No. C-07-6198 MHP Action Filed: December 6, 2007 DECLARATION OF KARANVEER DHILLON IN SUPPORT OF PLAINTIFFS' CONSOLIDATED OPPOSITION TO DEFENDANTS' MOTIONS TO DISMISS THE FIRST AMENDED COMPLAINT Date: Time: Place: Judge: August 18, 2008 2:00 p.m. Courtroom 15 Hon. Marilyn Hall Patel

REDACTED

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HOWARD RICE NENIEROVSKI CA BAEZ

I, Karanveer Dhillon, declare: 1. I am the Managing Director of Plaintiff Thomas Weisel International Private

Limited ("TWIPL"), and a Managing Director of Thomas Weisel Partners Group, Inc. ("TWP Group"). I participated in the conception and formation of both TWIPL and the Discovery Research initiative, and I am familiar with all aspects of those businesses. I frequently consulted with the management and staff of Plaintiff Thomas Weisel Partners, LLC ("TWP LLC") in connection with strategic decisions concerning TWIPL and Discovery Research. At times I also helped manage the day-to-day operations of TWIPL and Discovery Research, including supervising Defendant Praveen Chakravarty. I make this Declaration upon personal knowledge and, if called upon to testify, could and would testify competently hereto. A. TWP LLC And TWIPL. 2. TWP LLC is an investment bank and broker-dealer organized under the laws of

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Delaware and headquartered in San Francisco, California. TWP LLC is a wholly owned subsidiary of TWP Group, a publicly traded investment bank holding company also

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organized under the laws of Delaware and headquartered in San Francisco. TWP LLC is the largest of several TWP Group subsidiaries, and is TWP Group's main broker-dealer. TWP LLC provides strategic advisory and corporate finance services to U.S. and international emerging growth companies, and equity research, trade execution and asset management services to wealthy individuals and institutional investors. TWP LLC has offices in several cities around the globe, including the branch office in Mumbai, India that was devastated by Defendants' conduct. 3. TWIPL is an entity incorporated under the laws of India in August 2005.

Attached hereto as Exhibit A is a true and correct copy of TWIPL's certificate of incorporation dated August 31, 2005. 4. TWIPL is wholly owned by TWP LLC, either directly or indirectly through a

Mauritius holding company, Thomas Weisel Partners (Mauritius). 5. TWIPL leased office space in Mumbai, India, and employed Indian nationals

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who worked on several different initiatives, one of which was Discovery Research, which produced research reports on undercovered companies whose stocks traded on U.S. exchanges. On October 14, 2005, the New York Stock Exchange ("NYSE") approved the TWIPL Mumbai office as a branch of TWP LLC. Attached hereto as Exhibit B is a true and correct copy of a screen shot of the NASD website showing TWIPL's Mumbai office as an NYSE-approved branch of TWP LLC. 6. TWIPL provided services to TWP LLC pursuant to an Intercompany Services

Agreement ("ISA") with an effective date of September 30, 2005. The ISA provided that TWP LLC would pay TWIPL's operating expenses incurred in providing Discovery Research-related services to TWP LLC, plus 12 percent. Under the terms of the ISA, TWP LLC owned all intellectual property generated by Discovery Research in the course of providing services to TWP LLC, including research reports by Discovery Research analysts. Attached hereto as Exhibit C, and filed under seal, is a true and correct copy of the Intercompany Services Agreement. B. Discovery Research Was Part Of TWP LLC's Integrated Research Business Operated Out Of San Francisco, California. 7. Until TWP Group was forced to close it, Discovery Research was by far the

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largest component of TWIPL, employing more than 50 people, including 14 U.S.-licensed research analysts who published research on approximately 150 different companies whose stocks trade on U.S. exchanges. The purpose of the Discovery Research business was to allow TWP LLC to distribute research reports on a broader range of United States companies than TWP LLC previously had been able to provide. By using Discovery Research analysts based in India to perform the analysis and writing of the research reports, TWP LLC was able to extend coverage to smaller companies that were not cost-effective for U.S.-based analysts to cover. 8. The Discovery Research analysts--who researched and authored the research

reports that were Discovery Research's principal product--worked in Mumbai, but were functionally integrated into TWP LLC's larger research operations and subject to the same
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regulation and oversight as San Francisco-based TWP LLC research analysts. Though directly employed by TWIPL, the Discovery Research analysts were registered with U.S. regulatory authorities (including FINRA, the NYSE and the State of California) as associated persons of TWP LLC. All Discovery Research employees had to comply with T'WP LLC policies for research analysts. 9. Discovery Research was operated for the benefit of TWP LLC. As I noted above,

pursuant to the ISA, TWIPL was paid its operating costs for Discovery Research, plus 12 percent. TWP LLC earned revenue by selling subscriptions to Discovery Research reports. TWP LLC also directly benefited from Discovery Research's ability to broaden TWP LLC's research coverage universe in other ways. For example, TWP LLC made a market in the stocks of many of the companies covered by Discovery Research, and earned commission revenue when customers traded in those stocks. 10. TWP LLC's compliance department, headquartered in San Francisco, oversaw Discovery Research employees' compliance with applicable regulations and TWP LLC policies. San Francisco-based TWP LLC employees monitored and archived Discovery Research employees' emails, conducted compliance training for Discovery Research employees (via video conference or periodic visits to India), and periodically inspected TWIPL's Mumbai office. TWP LLC personnel based in San Francisco also monitored Discovery Research employees' trades to ensure they complied with TWP LLC policies and regulatory rules. One London-based TWP LLC compliance officer, whose work was overseen by management in San Francisco, assisted with some of these tasks. 11. TWP LLC was closely involved in Discovery Research coverage and ratings decisions, as well as in producing the research reports themselves. TWP LLC research managers based in San Francisco, in particular Keith Gay and Steve Buell, oversaw the strategic positioning of Discovery Research's product within the larger scheme of TWP LLC's research business. Decisions about coverage by Discovery Research analysts, as well as ratings or price target changes, were made by a seven-person Research Review and Oversight Committee ("RROC") that I was a member of and that was chaired by Gay, the
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San Francisco-based Head of Research for TWP LLC. The majority of the RROC were U.S.-based TWP LLC employees, three of whom were based in San Francisco. Except for the membership of the committee, the RROC followed the exact same procedures as TWP LLC's research review and oversight committee for U.S.-based analysts. The RROC had to approve any ratings and/or price target changes that Discovery Research analysts proposed to include in their research reports. 12. Before publication of Discovery Research reports, the reports had to be approved by a Supervisory Analyst employed by TWP LLC in San Francisco to ensure compliance with regulatory requirements. Additional support was provided by Supervisory Analysts located in Baltimore and London. All formal research reports written by Discovery Research analysts were edited, first in Mumbai and then by TWP LLC personnel in San Francisco or London to ensure that the content and format met TWP LLC standards. 13. The Discovery Research analysts' reports were copyrighted by TWP LLC, used a TWP LLC stock rating system and, in many cases, stated that TWP LLC made a market in the subject security. Each Discovery Research report listed its author's name and contact information including a phone number in the San Francisco area code and an @tweisel.com email address. Attached hereto as Exhibit D are true and correct copies of five research reports authored by Discovery Research analysts. These reports are a representative sample of the reports prepared by Discovery Research analysts. 14. Discovery Research's operations were intertwined with, and overlapped, those of TWP LLC in numerous other ways. For example, TWP LLC's legal department, based in San Francisco and New York, handled TWIPL's legal affairs, including those related to Discovery research. TWP LLC personnel in San Francisco also handled some or all of TWIPL's other administrative functions in the areas of human resources, accounting, and facilities management. C. Defendant Chakravarty Was A TWP LLC Employee And The Director Of Discovery Research. 15. Defendant Praveen Chakravarty was a Director of TWIPL and the head of
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Discovery Research's Mumbai operation. Chakravarty was employed by TWP LLC and registered with U.S. regulatory authorities (including FINRA, the NYSE and the State of California) as an associated person of TWP LLC. I was Chakravarty's direct supervisor once he came to Mumbai. 16. By virtue of his position as Director of Discovery Research, Chakravarty had access to most if not all confidential information about Discovery Research. Using the shared TWP LLC/TWIPL computer system, Chakravarty received and/or reviewed documents showing employee compensation levels, current and projected profit and loss statements, and other financial planning documents. Chakravarty was also intimately involved with the research at the core of the Discovery Research business and, as a result, had access to research reports, information about coverage decisions, contact information for the companies the Discovery Research team covered, training materials, and knowledge about the research analysts and associates themselves. Chakravarty also had access to confidential customer information about subscribers to the Discovery Research service. D. BNPP Asia And Chakravarty's Illegal Raid On Discovery Research Destroyed That Business And Harmed TWP LLC. 17. On or about October 14, 2007, Chakravarty met at the Oberoi Hotel in Mumbai with senior managers of Defendant BNP Paribas (Asia) Limited (BNP Paribas Asia) and together they plotted a raid on Discovery Research's most qualified employees. I know this because, when Discovery Research employees began resigning in droves in late October and early November 2007, TWP LLC management asked the compliance department to search through Chakravarty's recent emails for evidence of his involvement in the resignations and they found an email from Jonathan Harris of BNP Paribas Asia to Chakravarty dated October 15, 2007 describing the proposed raid and requesting that Chakravarty provide Harris confidential information about the compensation and experience of Discovery Research analysts. A true and correct copy of that email is attached hereto as Exhibit E. 18. Plaintiffs' counsel has provided me with a document--consisting of three spreadsheets--that our forensic experts, KPMG, found as a password-encrypted file on
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Chakravarty's firm-issued laptop. This document appears to contain the information Harris requested in his October 15, 2007 email, including Discovery Research employees' (1) 2007 base and bonus compensation, (2) 2008 expected TWP base compensation, (3) sector coverage, (4) years of experience, (5) educational background and (6) 2008 "proposed" base and bonus compensation, including a signing bonus. The spreadsheet also contains salary and bonus information for Chakravarty and a "purchase price" analysis. Another worksheet in that same encrypted document contains a schedule for interviews with individual Discovery Research analysts on October 25 and 26, 2007, approximately ten days after Harris's October 15 email and just a few days before the analysts began to give notice. A third worksheet appears to contain a timeline for the defection of the Discovery Research analysts to BNP Paribas. Attached hereto as Exhibit F is true and correct copy of the document that was provided to me by counsel with the understanding that it had been found on Chakravarty's laptop. 19. Between October 31 and November 6, 2007, seventeen Discovery Research employees gave notice--including ten of Discovery Research's fourteen FINRA-licensed research analysts and seven research associates. Of the four remaining research analysts, three had only been licensed for a few months. Chakravarty also would have resigned if he had not first been terminated for cause on November 7, 2007, after we discovered the Harris email describing Chakravarty's conspiracy with BNP Paribas. In addition to the seventeen analysts who resigned, TWIPL's human resources generalist, Bijal Thakkar, who we later discovered had materially assisting Chakravarty, quit on November 7. 20. Chakravarty and the BNP Paribas Defendants' orchestration of the mass defection of key Discovery Research employees destroyed the Discovery Research business. Due to the simultaneous departure of most of its licensed analysts, Discovery Research could not produce timely research reports on many of the stocks it covered. Despite intensive focus over several weeks on rehabilitating the damaged business--including exploring efforts to quickly recruit, hire, train and license new research analysts--TWP LLC management, in consultation with me, concluded reluctantly that the loss of talent rendered
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Discovery Research unable to provide the quality and scope of research coverage that TWP LLC's subscription clients demanded (and had paid for). As a result, on December 6, 2007, TWP Group announced that Defendants' actions had forced the shutdown of Discovery Research. The closure of Discovery Research damaged TWP LLC irreparably, including by depriving TWP LLC of current and future revenue from the sale of subscriptions and from trading in stocks covered by Discovery Research. 21. In May 2008, TWIPL closed down the part of its operations that did convertible bond research for TWP LLC. TWIPL continues to provide limited support for TWP's India Fund of Funds. E. BNP Paribas Is Using The Stolen Discovery Research Employees In A New India Research Venture. 22. I am informed and believe that BNP Paribas, acting through BNP Paribas Securities (Asia) Limited, created a Mumbai-based research team, comprised almost entirely of former Discovery Research employees, to investigate and analyze the stocks of Indian public companies. I recently obtained a March 13, 2008 research report authored by one of the former Discovery Research analysts, Vijay Sarathi. (An investor that I work with gave the report to me; he said he came across it while performing due diligence on the Indian financial services sector). The report lists Sarathi's employer as "BNP Paribas India Solutions Pvt Ltd" ("BNPP India") which is described as a "member company of the BNP Paribas Group." The report lists twenty-one members of BNPP India's "India Research Team." Every single person listed as a member of the team was formerly part of Discovery Research--Chakravarty, the seventeen research analysts and associates who left Discovery Research en masse between October 31 and November 6, and three other Discovery Research research associates who left subsequently. Attached hereto as Exhibit G is a true and correct copy of the May 13, 2008 BNPP India research report authored by Vijay Sarathi.

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23. I am also informed and believe that three former Discovery Research 2 3 4 5 6 7 8 9 10 11 12
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administrative employees--Bijal Thakkar, Neelima Mane and Roshan Shetty--have also moved to Chakravarty's new venture. I declare under penalty of perjury under the laws of the United States of America that the foregoing is true and correct. Executed this 2 day of June 2008 at
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