Portfolio’s Scot Paltrow has a very interesting story on some doings between Pequot Capital and one of the firm’s former employees, who had funneled inside information to it about Microsoft several years ago, causing an SEC investigation.

Divorce-court proceedings show Pequot has paid the ex-employee $1.4 million since last year and pledge another $700,000. All this to someone who hasn’t worked at the firm in seven years and was under investigation by the feds for giving inside information to Pequot to help it make money on Microsoft stock.

That investigation, which also included allegations about Morgan Stanley CEO John Mack, went nowhere, to the chagrin of the Senate Judiciary Committee and the SEC’s inspector general. Here’s why:

Records made public in the investigation show that in February 2001, in the same email in which he offered Zilkha a job, Samberg pressed him for information about Microsoft. Zilkha then was still employed by Microsoft. The email said “might as well pick your brain before you go on the payroll!”

On April 6, 2001, Samberg in an email pressed Zilkha for any “tidbits” about Microsoft. Zilkha responded the next day that he would get back to Samberg “ASAP.”

Three days later, Samberg, who had been betting that Microsoft’s stock would go down, reversed course and began amassing 30,000 Microsoft options in a bet the stock would go up, according to S.E.C. records from the case.

On April 17, Zilkha reported in an email to Samberg that Microsoft’s chief financial officer had been unusually upbeat in advance of the company’s pending quarterly earnings announcement. The email appears in S.E.C. files.

Microsoft announced its earnings on April 19, beating analysts’ expectations. The stock rose, and a day later Samberg closed out his positions, reaping that $12 million profit. That day, Samberg emailed Zilkha that “I shouldn’t say this, but you probably have paid for yourself already,” investigators found.

Seem like it’s hard not to bring an insider-trading case with that kind of evidence.

So why the $2.1 million in payments? Paltrow notes that it could be some sort of settlement because the ex-employee was fired from Pequot in 2001, though he also notes that was a long time ago.

But he also reports that the ex-employee, who had been given immunity, gave testimony favorable to Pequot in the investigation before it ended in 2006. The payments began the next year.

This is good work by Portfolio to bring this to light.

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Ryan Chittum is a former Wall Street Journal reporter, and deputy editor of The Audit, CJR's business section. If you see notable business journalism, give him a heads-up at rc2538@columbia.edu. Follow him on Twitter at @ryanchittum.