Raj Rajaratnam, the hedge-fund tycoon and Galleon Group LLC co-founder at the center of a nationwide insider trading crackdown, was found guilty of all 14 counts against him in the largest illegal stock-tipping case in a generation.
A jury of eight women and four men in Manhattan returned its verdict today after hearing evidence that Rajaratnam, 53, engaged in a seven-year conspiracy to trade on illegal tips from corporate executives, bankers, consultants, traders and directors of public companies including Goldman Sachs Group Inc. He gained $63.8 million, prosecutors said.
The trial came as Manhattan U.S. Attorney Preet Bharara promised to crack down on “rampant” illegal trading on Wall Street. Rajaratnam was convicted on five counts of conspiracy and nine counts of securities fraud. Conspiracy carries a maximum sentence of five years; securities fraud can bring 20 years in prison.
A related insider case against former Galleon trader Zvi Goffer is scheduled for trial this month.
Galleon was among the 10 largest hedge funds in the world in the early years of the last decade. It managed $7 billion at its peak in 2008. Rajaratnam's net worth of $1.3 billion made him the 559th richest person in the world, Forbes Magazine said in 2009.
The case was the first one focused exclusively on insider trading in which prosecutors wiretapped their targets' telephone conversations, a tactic used in organized crime investigations. Jurors heard more than 40 recordings of Rajaratnam, in some of which he can be heard gathering secrets from his sources.
Rajaratnam used inside information to trade ahead of public announcements about earnings, forecasts, mergers and spinoffs involving more than a dozen companies, according to the evidence at the trial. Among them were Santa Clara, Calif.-based Intel, New York-based Goldman Sachs, Google Inc., ATI Technologies Inc., Akamai Technologies Inc. and Hilton Hotels Corp.
Prosecutors said Rajaratnam's sources included Rajat Gupta, who until last year was a director at Goldman Sachs, and Kamal Ahmed, a Morgan Stanley investment banker who prosecutors said passed tips through Smith. Both deny wrongdoing, and neither has been criminally charged.
Born in Sri Lanka's capital, Colombo, Rajaratnam was educated there at St. Thomas' Preparatory School before leaving for England, where he studied engineering at the University of Sussex. He came to the U.S. to get his master's of business administration, graduating from the University of Pennsylvania's Wharton School in 1983.
--Bloomberg News--
