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Billionaire Investor Rajaratnam Found Guilty of Fraud and Conspiracy; Faces 19 1/2 Years

Billionaire Investor Rajaratnam Found Guilty of Fraud and Conspiracy; Faces 19 1/2 Years

Earlier today, billionaire investor Raj Rajaratnam was found guilty on all 14 counts of securities fraud and conspiracy by a federal jury in Manhattan. A jury of twelve deliberated for twelve days after a trial that had started in early March. The 53-year founder of the Galleon Group hedge fund could face up to 25 years in prison; under federal sentencing guidelines, his recommended sentence could be as much as 19 and a half years.

As the Wall Street Journal says, Rajaratnam’s conviction gives the US “a significant win in a push to prosecute insider trading on Wall Street and in corporate America.” Galleon accumulated $63.8 million in illegal profits and avoided losses through its illegal trading in stocks including Google and Hilton Worldwide, according to government calculations.

At its peak, the Galleon Group hedge fund managed more than $7 billion in assets and was one of the largest trading clients of investment banks including Goldman Sachs and Morgan Stanley.

Crucial to the prosecution’s case against Rajaratnam were 45 wiretaps which revealed how Rajartnam “trafficked in insider tips provided to him by a web of contacts at the top tier of American business.” The Wall Street Journal notes that the prosecution’s successful use of wiretaps opens the way for more extensive use of a tactic that had been mostly used for drug and terrorism cases, not white collar crime. Some details about the wiretap evidence from the New York Times Dealbook blog:

Over a nine-month stretch in 2008, federal agents secretly recorded Mr. Rajaratnam’s telephone conversations. They listened in as Mr. Rajaratnam brazenly and matter-of-factly swapped inside stock tips with corporate insiders and fellow traders.

“I heard yesterday from somebody who’s on the board of Goldman Sachs that they are going to lose $2 per share,” Mr. Rajaratnam said to one of his employees in advance of the bank’s earnings announcement.

“One thing we know, this is very confidential, someone is going to put in a term sheet for Spansion,” he told a colleague, referring to a proposed acquisition of the technology company.

“So yesterday they agreed on, at least they’ve shaken hands,” a tipster told Mr. Rajaratnam about an upcoming deal involving another publicly traded business. “So I think, uh, you can now just buy.”

Rajaratnam was arrested on October 16, 2009, by federal agents at his apartment on Manhattan’s Upper East Side. 25 others — 21 of whom have pleaded guilty — including former executives at I.B.M., Intel and Bear Stearns have been charged with insider trading. Three are scheduled for trial next week.

Rajaratnam reportedly showed no emotion as the verdict was read. He holds properties in his native Sri Lanka and in Singapore and the prosecution had asked that he be placed in custody, saying that he was at flight risk. Judge Richard J. Holwell ordered home detention with electric monitoring; Rajaratnam has posted $100 million bond, secured by $20 million in cash or property. His sentencing is set for July 29th. As the New York Times says, he and his lawyers plan to appeal the guilty verdict, so the case is not yet over.

In a statement, Manhattan U.S. Attorney Preet Bharara described Rajaratnam as “one of the most educated, successful and privileged professionals in the country.” However, as Bharara continued:

“Yet like so many others recently, he let greed and corruption cause his undoing. Unlawful insider trading should be offensive to everyone who believes in, and relies on, the market. It cheats the ordinary investor….We will continue to pursue and prosecute those who believe they are both above the law and too smart to get caught.”

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Photo by steakpinball

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46 comments

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9:02AM PDT on Jul 12, 2011

thanks

4:59PM PDT on May 13, 2011

What I don't understand is when he is found guilty why is he not hauled off to jail right away. It seems to me that it is a VERY big waste of time and money to have him come back to be sentenced. If he wants to appeal the verdict, he can do it from jail. Even when they have an electronic bracelet they can still run. Picture this, a helicopter, cut bracelet, off to small airport and away he goes. If he is in jail he can't do that. Send him to a regular prison not one of those club feds. Maybe if these rich thieves got a taste of what happens to ordinary people they might think twice before they stole. How about if you steal $1000.00 you get 1 year in prison, steal $2000.00 you get 2 years and so on. I believe that would make people think twice before they stole or swindled another person or persons. That would be JUSTICE. Just a thought.

10:25AM PDT on May 13, 2011

And to think this is the type of person the GOP seeks to protect

9:40AM PDT on May 13, 2011

Rob a liquor store and you get 10 or more years maximum security. Money stolen hundreds, maybe a thousand. Lives threatened, one to several people. White collar crime get a few years minimum security. Money stolen hundreds of thousands to millions. Lives threatened, literally thousands. Unless of course your Lehman Brothers or Fannie Mae, Goldman Sachs, where your crimes added up to billions, billions of lives threatened, and you don't have to pay a second of time.
Where's the justice? If your poor you get the book thrown at you. If your rich you can literally buy justice out. Awesome.

9:02AM PDT on May 13, 2011

Jail him and take everything her has as well as the proffits he made for others in his buisness.

6:49PM PDT on May 12, 2011

This is one of the reasons why the country is in debt.

3:51PM PDT on May 12, 2011

pffft!

2:49PM PDT on May 12, 2011

This is disgusting. "The meek shall inherit the earth?" At what a painful cost and lesson dealt by some of the greediest, meanest, egomaniacs imaginable. Shame, shame, shame on him and his minions.

2:06PM PDT on May 12, 2011

Taken off Jacksonian Lawyer.wordpress.com/2009/10/19

…Raj Rajaratnam (#559 on Forbes’ list of World’s Billionaires), the founder of the $3 Billion Galleon Group Hedge Fund, and noteworthy fund-raiser for the DNC and Barack Hussein Obama’s presedential campaign has been arrested and charged with insider trading of stocks of several companies, including Hilton, Clearwire and Google.

According to the Federal Election Commission, Rajaratnam contributed over $87,000 to Obama’s campaign, the DNC and various campaigns on behalf of Hillary Rodham Clinton, with a $30,800 donation going to Obama’s “Victory Fund.” The Center for Responsive Politics reports his donations to total$118,000. The DNC also reports that Rajaratnam raised more than $100,000 for Obama through his Wall Street and Sri Lankan-American connections. Based on these fund-raising and contribution efforts, it appears Rajaratnam was able to exert influence over Obama, particularly for Rajaratnam’s pro-Tamil (see below) agenda. It is clear that Rajaratnam’s financial clout over the DNC and, particularly, Barack Hussein Obama, has levied a great deal of influence and caused further support of Tamil groups for Obama.

Rajaratnam supported the Liberation Tigers of Tamil Eelam (LTTE), an organization that is on the US State Department’s Foreign Terrorist Organization List (see number 27). Connections of the LTTE to the Tamil Tigers are fairly clear and now ques

2:05PM PDT on May 12, 2011

Crime pays: That works out to 3.27M$/yr while he is in prison.
Only in America!

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Kristina Chew Kristina Chew teaches and writes about ancient Greek and Latin and is Online Advocacy and Marketing... more
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