Hedge fund billionaire Raj Rajaratnam was found guilty Wednesday in U.S. District Court in New York on charges of conspiracy and securities fraud stemming from his involvement in what federal prosecutors called the largest hedge fund insider-trading scheme in history.
Rajaratnam, managing member of Galleon Management LLC, was convicted after an eight-week trial before U.S. District Judge Richard J. Howell that featured the FBI's use of phone taps and the testimony of longtime friends that could put other hedge fund managers behind bars.
Accused of running a tight web of highly placed tipsters that led to more than $63 million in profits, Rajaratnam, 53, was convicted on nine counts of securities fraud and five counts of conspiracy for trading on stocks such as Advanced Micro Devices, Intel Corp., Google and Goldman Sachs.
At his July 29 sentencing, Rajaratnam faces up to 205 years in prison, though federal guidelines make a sentence of about 20 years more likely. Judge Howell rejected a prosecution bid for immediate incarceration, instead allowing Rajaratnam to remain free on bail while wearing an electronic monitor.
"Raj Rajaratnam, once a high-flying billionaire and hedge fund manager, is now a convicted felon, 14 times over," said U.S. Attorney Preet Bharara in New York. "Rajaratnam was among the best and the brightest - one of the most educated, successful and privileged professionals in the country. Yet, like so many others recently, he let greed and corruption cause his undoing.
"The message today is clear - there are rules and there are laws, and they apply to everyone, no matter who you are or how much money you have," he said. "We will continue to pursue and prosecute those who believe they are both above the law and too smart to get caught."
In just over 18 months, Mr. Bharara's office has charged 47 persons with insider-trading crimes. Rajaratnam is the 35th to be convicted.
According to court records, Rajaratnam repeatedly traded on material, nonpublic information pertaining to upcoming earnings forecasts, mergers, acquisitions and other business combinations from 2003 to 2009. The insider information was given as tips by those at hedge funds, public companies and investor relations firms - including Goldman Sachs, Intel and IBM.
Based on that information, the documents said, Rajaratnam executed trades in the stock of public companies, earning tens of millions of dollars.
The evidence at trial included, among other things, recordings of wiretapped phone calls between Rajaratnam and various co-conspirators, including Anil Kumar, a senior partner and director at McKinsey; Rajiv Goel, an Intel employee; Adam Smith, a portfolio manager and analyst at Galleon; and Danielle Chiesi, a hedge fund employee at New Castle Partners.
The documents show that Rajaratnam engaged in overlapping conspiracies to commit securities fraud with these persons and others. Kumar, Goel, Smith and Chiesi previously pleaded guilty to insider-trading charges.
© Copyright 2015 The Washington Times, LLC. Click here for reprint permission.