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SEC charges hedge fund employee with insider trading in Carter's probe

By Amanda Becker

Nov 14 (Reuters) - A New York-based hedge fund employee has been charged with trading on inside information about the children's clothing company Carter's Inc, the U.S. Securities and Exchange Commission (SEC) said on Thursday.

Mark Megalli, an investment professional with the hedge fund Level Global Investors LP, obtained inside information that helped his firm avoid about $2.4 million in losses and make $853,655 in ill-gotten profits, the SEC said in a statement.

Megalli received the information on which he traded from a former vice president of investor relations at Carter's, Eric Martin, who had left to form his own consulting firm but maintained contacts at the Atlanta-based company. The SEC charged Martin with insider trading in August.

"The information was hot enough that Megalli sometimes conducted the trades while he was still on the phone with his source," said William Hicks, an associate regional director in the SEC's Atlanta office.

The U.S. Attorney's Office for the Northern District of Georgia has launched a parallel criminal case against Megalli, the SEC said.

The SEC's complaint, filed in a federal court in Georgia, alleges that Megalli began trading on information from inside Carter's shortly after joining Level Global Investors in August 2009.

The investigation of Megalli is part of a larger probe into insider trading and financial fraud at Carter's. The SEC has already charged Joseph Elles, the company's former executive vice president, Joseph Pacifico, its former president, and Michael Johnson, an employee of retailer Kohl's Corp who worked on the Carter's account.

Carter's has been cooperating with the SEC as part of a non-prosecution agreement.