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FACTDROP: Hedge fund billionaire Raj Rajaratnam sentenced to 11 years in prison; Longest-ever term in US insider-trading case
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10/14/2011

Hedge fund billionaire Raj Rajaratnam sentenced to 11 years in prison; Longest-ever term in US insider-trading case


Πηγή: finfacts
Oct 14 2011

Hedge fund billionaire Raj Rajaratnam on Thursday was sentenced to 11 years in prison, the longest-ever term imposed in an US insider-trading case.

During the sentencing proceeding, Judge Richard Holwell said that insider trading"is an assault on our free markets," and added that "the crimes and scope of the crimes [committed by Rajaratnam] reflect a virus in our business culture that needs to be eradicated."

The Galleon Group founder Raj Rajaratnam, a billionaire of Sri Lankan origin and among 14 others who have been jailed in the case, two senior executives of Intel and McKinsey - - the management consulting firm - - who were friendly with Rajaratnam and are of Indian origin, earlier pleaded guilty to supplying him with insider tips. The Indian-born Rajat Gupta, a former director of Goldman Sachs who had been a partner in a business with Rajaratnam and headed McKinsey, the management consultancy firm, from 1994 to 2003, is under investigation for passing insider information on Warren Buffett's 2008 investment in the US investment bank, to Rajaratnam.

Gupta's former colleague at McKinsey, Anil Kumar, pleaded guilty in January 2010 to conspiracy and securities fraud. He invested some of the money in Galleon and made a total of $2.6m. Kumar, 52 years old, said he was approached by Rajaratnam - - a friend from their time at the Wharton School at the University of Pennsylvania in the early 1980s - - in late 2003 or early 2004 and began providing inside tips to him about McKinsey clients as far back as 2004, including on chip maker Advanced Micro Devices's (AMD) plans to acquire ATI Technologies in 2006.

Manhattan US Attorney Preet Bharara stated: "Two years ago, Raj Rajaratnam stood at the summit of Wall Street, commanding his own financial empire. Then he was arrested, tried, and convicted by a jury. Mr. Rajaratnam stood convicted 14 times over of felonies, his empire exposed as a web of fraud and corruption that entangled many. Today, Mr. Rajaratnam stood once more and faced justice which was meted out to him. It is a sad conclusion to what once seemed to be a glittering story. We can only hope that this case will be the wake-up call we said it should be when Mr. Rajaratnam was arrested. Privileged professionals do not get a free pass to pursue profit through corrupt means. The message is the same for everyone no matter who you are or how much money you have -- obey the law or face the fate of those who don’t."

According to the indictment filed in Manhattan federal court, other court documents, and statements made during related court proceedings:

From 2003 to March 2009, Rajaratnam repeatedly traded on material, nonpublic information (inside information) pertaining to upcoming earnings forecasts, mergers, acquisitions, and other business combinations. As the evidence at trial showed, the inside information was given as tips by insiders and others at hedge funds, public companies, and investor relations firms - - including Goldman Sachs, Intel, IBM, McKinsey & Company, Moody’s Investor Services, Market Street Partners, Akamai Technologies, and Polycom Inc. Based on the inside information, Rajaratnam executed trades in the stock of public companies, including Goldman Sachs, Clearwire, Akamai, AMD, Intel, Polycom, and People Support. The court found Rajaratnam earned "well over $50m" from his illegal trading.

The evidence at trial included, among other things, recordings of wiretapped phone calls between Rajaratnam and his various co-conspirators, including: Anil Kumar, a former senior partner and director at McKinsey; Rajiv Goel, a former employee of Intel; Adam Smith, a former portfolio manager and analyst at Galleon; and Danielle Chiesi, a former employee of the hedge fund New Castle Partners. Rajaratnam engaged in overlapping conspiracies to commit securities fraud with these individuals, as well as with Mark Kurland, a co-founder at New Castle Partners, Robert Moffat, a former senior vice president at IBM, and Roomy Khan, who traded securities on her own behalf.

In addition to his prison term, Rajaratnam, 54, of New York, was sentenced to two years of supervised release and ordered to pay forfeiture in the amount of $53,816,434 and a $10m fine. Rajaratnam will surrender to authorities on November 28, 2011.




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