- The Washington Times - Saturday, October 17, 2009

NEW YORK (AP) | One of America’s wealthiest men was among six hedge fund managers and corporate executives arrested Friday in a hedge fund insider trading case that prosecutors say generated more than $25 million in illegal profits and should be a wake-up call for Wall Street.

Raj Rajaratnam, a partner in Galleon Management and a portfolio manager for Galleon Group, a hedge fund with up to $7 billion in assets under management, was accused of conspiring with others to trade based on insider information about several publicly traded companies, including Google Inc.

U.S. Attorney Preet Bharara 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.

He said the case should cause financial professionals considering insider trades in the future to wonder whether law enforcement is listening. “This case should be a wake-up call for Wall Street,” he said.

Joseph Demarest Jr., the head of the New York FBI office, said it was clear that “the $20 million in illicit profits come at the expense of the average public investor.”

The Securities and Exchange Commission, which brought separate civil charges, said the scheme generated more than $25 million in illegal profits.

Galleon Group LLP said it was shocked to learn of Mr. Rajaratnam’s arrest at his apartment. “We had no knowledge of the investigation before it was made public, and we intend to cooperate fully with the relevant authorities,” it said.

Mr. Rajaratnam, 52, was ranked No. 559 by Forbes magazine this year among the world’s wealthiest billionaires, with a $1.3 billion net worth.

He has been described as a savvy manager of billions of dollars in technology and health care hedge funds at Galleon, which he started in 1996. The firm is based in New York City with offices in California, China, Taiwan and India.

He lives in New York.

According to a criminal complaint filed in U.S. District Court in Manhattan, Mr. Rajaratnam obtained insider information and then caused 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.

A spokesman for Mr. Rajaratnam did not return a phone call for comment Friday.

Also charged in the scheme are Rajiv Goel, 51, of Los Altos, Calif., a director of strategic investments at Intel Capital, the investment arm of Intel Corp.; Anil Kumar, 51, of Santa Clara, Calif., a director at McKinsey & Co. Inc., a global management consulting firm; and Robert Moffat, 53, of Ridgefield, Conn., senior vice president and group executive at International Business Machines Corp.’s Systems and Technology Group.

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