Fraud and conspiracy may "pay" in a different way for the Galleon Hedge Fund founder convicted on all charges this morning by Manhattan federal jury. Rajaratnam is accused of having made $60 million by trading on inside information. He could get 19+ years in jail, by guidelines. Maximum penalty he could face is 25 years.
Wiretap evidence did him in, and with co-conspirators named, more convictions are likely to follow.
Wall Street take heed.
Rajaratnam's defense was predicated on the witnesses lied. But jurors evidently thought that the tapes didn't. Mostly calls between Rajaratnam and Rajiv Goel, "a former executive at Intel who pleaded guilty to leaking inside information and testified against his friend at trial."
In leaking information to Rajaratnam,
. . .Mr. Goel discussed the timing of the Clearwire investment. . .in addition to his own personal needs, including a job and a Global Positioning System for a trip to Europe the men were planning with their families.
Among the details Mr. Goel revealed were the names of potential board members in the new venture, though on the call Mr. Rajaratnam seemed unimpressed with that information.
In another call, Mr. Rajaratnam told Mr. Goel that he had just bought shares in PeopleSupport on Mr. Goel’s behalf, trades the government contends were based on inside information.
Why is Wall Street full of sweaty palms today?
Rajaratnam's
. . .Galleon Group hedge fund managed more than $7 billion in assets. Investment banks including Goldman Sachs and Morgan Stanley counted Galleon, which paid out roughly $300 million in trading commissions annually to brokerage firms, as one of their largest trading clients.
Plus, there are 25 other defendants in this case. 21 of whom have pleaded guilty, among them former executives at I.B.M., Intel and Bear Stearns. One can bet that the information they've provided will contribute to even more fraud and conspiracy charges being brought against even more defendants.
Prosecutors dismantled Mr. Rajaratnam’s defense by acknowledging that Galleon performed legitimate research. But at the same time, they argued, the firm routinely violated securities laws. In the words of a former Galleon portfolio manager who testified during the trial, the firm did its homework — but also cheated on the test.
“The defendant knew the rules, but he did not care,” said a prosecutor, Reed Brodsky, in his summation. “Cheating became part of his business model.” NYT
That same kind of cheating is part of other hedge funds buisiness models, too, I bet.
Just ask Raj Rajaratnam's brother what he thinks of Wall Street hedge fund traders.
Rengan Rajaratnam, who has not been criminally charged, emerged – through several wiretapped conversations – as a colorful figure during the trial. On a call in August 2008, Rengan told his brother about his efforts to press his friend, a McKinsey consultant, for confidential information.
Rengan Rajaratnam called the consultant “a little dirty” and boasted that he “finally spilled his beans” by sharing secrets about a corporate client.
[snip]
“Scumbag,” Rengan Rajaratnam said, referring to his friend. “Everybody is a scumbag.”
ADD'l INFO: Rajaratnam's net worth has been pegged at $1.3 billion, putting him within the top 600 wealthiest people in the world. His bail is set at $100 million and he remains free and under electronic monitoring.
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. Investment News