Sri Lanka born Raj Rajaratnam indicted by FBI for alleged insider trading in New York
On Friday October 16th, 2009, Raj Rajaratnam the billionaire founder of the hedge fund firm Galleon Group, and ex-directors at a Bear Stearns Cos. hedge fund was arrested by the FBI and accused of conspiring with others to trade based on insider information about several publicly traded companies, including Google Inc.
If convicted he will face maximum jail sentence of 20 years.
U.S. Attorney Preet Bharara, putting total profits in the scheme at $20.6 million, told a news conference it was the largest hedge fund case ever prosecuted and marked the first use of court-authorized wiretaps to capture conversations by suspects in an insider trading case.
According to a criminal complaint filed in U.S. District Court in Manhattan, Rajaratnam obtained insider information and then caused the Galleon Technology Funds to execute trades that earned a profit of more than $12.7 million between January 2006 and July 2007. Other schemes garnered millions more, authorities said.
Also accused were Rajiv Goel, who worked at Intel Capital as a director in strategic investments, Anil Kumar, who worked as a director at McKinsey & Co., and IBM Corp. executive Robert Moffat. The former officials at Bear Stearns Asset Management are Danielle Chiesi and Mark Kurland, who were affiliated with the firm’s New Castle Partners, which managed about $1 billion.
Raj Rajaratnam, was also a major contributor to the Hillary Clinton campaign and also the single largest known U.S. contributor to a charity, Tamil Rehabilitation Organization (TRO) allegedly linked to the Tamil Tiger terror group in Sri Lanka. The TRO was proscribed by the U.S.Treasury Department two years ago. The Treasury Department proscribing the TRO declared that it was a front organization of Sri Lanka’s Tamil Tiger outfit the United States designated as a Foreign Terrorist Organization FTO) in 1997 and that the charitable donation the TRO received were diverted to the Tamil Tigers in Sri Lanka to wage war against the Sri Lanka state.
The Tamil Tigers or LTTE was totally defeated in Sri Lanka along with the killings of its entire leadership in May this year.
Raj Rajaratnam recently (September 2009) pledged to donate a million US dollars to help with the rehabilitation of former LTTE combatants.
The Sri Lankan Tamil self-made billionaire hedge fund manager is now the 236th richest American according to the 2009 Forbes Magazine. He was listed as 262nd richest American in the 2008 Forbes magazine. As of early 2009, he is the richest Sri Lankan born person in the world.
Galleon Group's Titan Fund has returned 20% so far this year (2009), outperforming the Nasdaq by 33%. Rajaratnam started his career as an analyst at the investment banking boutique Needham & Co where his focus was on electronics. He was promoted to president 1991 and launched Galleon six years later.
According to Bloomberg News Galleon, which started as a hedge fund firm focusing on technology and health-care stocks, grew to more than $5 billion in 2001 from its start in January 1997. Rajaratnam founded Galleon with three other colleagues from Needham & Co. an investment bank that focused on technology and health-care companies. None of the other co-founders are still at the firm, according to a Galleon marketing document.
Galleon Management, the company’s advisory business, oversaw more than $2.6 billion at the end of March, mostly on behalf of hedge funds, according to regulatory filings it submitted to the Securities and Exchange Commission at the time. Rajaratnam held a 50 percent to 75 percent controlling stake in the advisory, the documents show.
Rajaratnam used “devices, schemes and artifices to defraud,” one of two complaints in Manhattan federal court says. Prosecutors said they used wiretaps on the billionaire’s phone. “A number of the calls intercepted over the wiretap consist of Rajaratnam either providing, receiving, or seeking material nonpublic information about various publicly traded companies,” a complaint says.
The case represents the first time wiretaps were used to target insider trading, U.S. Attorney Preet Bharara in Manhattan said at a press conference. Tips came from insiders and others at hedge funds, investor relations firms, and companies including Intel, IBM, McKinsey, and companies whose shares were traded in the scheme, Bharara said.
Prosecutors said they’ve been investigating the case since at least November 2007, when a person they don’t name in the complaint began meeting with agents of the Federal Bureau of Investigation. The person, who has pleaded guilty and is cooperating with authorities, had used inside information to trade securities and tipped Rajaratnam since 2006, prosecutors say in one of two complaints filed in Manhattan federal court.
The famous interior designer and millionaire Martha Stewart spend many years in jail after being convicted of insider trading.
- Asian Tribune -