RAJ RAJARATNAM, the US hedge fund billionaire, has been found guilty of insider trading, handing the US government a significant victory as it expands its prosecution of wrongdoing on Wall Street.
After 12 days of deliberation, the jury of eight women and four men issued its verdict yesterday, convicting the former head of Galleon Group on all 14 counts of securities fraud and conspiracy. He was found guilty of making $63 million by trading after learning secrets about earnings announcements and corporate takeovers before they were announced.
Rajaratnam faces up to 19½ years in prison when he is sentenced on July 29th. He sat motionless between his two lawyers as the verdict was read, wearing a stunned expression.
Prosecutors had asked that he be remanded into custody immediately, saying he had “tremendous incentive to flee at this time”.
Richard Holwell, the Manhattan federal judge overseeing the case, ruled however that Rajaratnam wear an electronic monitoring bracelet while awaiting sentencing. He will remain on bail of $100 million, the amount set when he was charged.
John Dowd, Rajaratnam’s lawyer, said he planned to appeal, citing the admissibility of the wiretaps central to the prosecution’s case. Mr Dowd said in a press conference that the government had started out in the case alleging Mr Rajaratnam traded in 37 stocks and by the end of the trial had reduced the number to 14 stocks.
“The score is 23-14 in favour of the defendant,” Mr Dowd said. “We’ll see you in the second circuit.”
The verdict is a significant win for the US attorney’s office in Manhattan, which brought the high-stakes case as part of a broader crackdown on insider trading.
The prosecution – the largest insider-trading investigation in a generation – involved unusual tactics for such a case, including wiretaps, and has expanded to include criminal charges against more than two dozen financial professionals, many of whom have already pleaded guilty.
During the seven-week trial in a lower Manhattan courtroom, prosecutors played 45 secretly recorded phone conversations, called 18 witnesses and showed the jury hundreds of e-mails, phone records and other documents that paired Rajaratnam’s trades against the alleged tips.
The trial featured cameos from senior finance industry figures.
Lloyd Blankfein, chairman of Goldman Sachs, testified for the government. Rajat Gupta, the former global head of McKinsey consultancy, was recorded discussing a Goldman board meeting.
The case also had the drama of testimony from former business school classmates and friends of Rajaratnam and a Galleon executive who pleaded guilty.
The jury did not hear from Rajaratnam, the Sri Lankan-born American who rose through Needham Co as a semiconductor analyst to form Galleon 14 years ago. The fund, which managed more than $1 billion at its peak, was unwound shortly after his October 2009 arrest.
During the trial, Rajaratnam mostly sat quietly between his lawyers away from the defence table. He took notes occasionally, conferred with them at times and laughed during funny parts of testimony.
Another criminal trial involving an offshoot of the Galleon ring is set to begin this month. – (Copyright The Financial Times Limited 2011)
