Wednesday, May 11, 2011

Hedge fund manager Rajaratnam guilty in insider trading trial

Hedge fund manager Rajaratnam guilty in insider trading trial
By Adam Shell, USA TODAY

NEW YORK — A former hedge fund titan that became the poster child for the government's aggressive crackdown on Wall Street white-collar crime was convicted of insider trading Wednesday, giving the prosecution a high-profile win in its biggest insider case in a generation.

The conviction of billionaire Raj Rajaratnam, 53, who ran the hedge fund firm Galleon Group, sent a stern and clear message to Wall Street: Prosecutors have zero tolerance for investors who break the law by trading on — and profiting from — secret market-moving information before it becomes publicly available to all investors.

The jury convicted Rajaratnam on all 14 counts of conspiracy and securities fraud. The Galleon co-founder was accused of reaping $63.8 million in illicit profits or loss avoidance with the help of tipsters feeding him illegal stock tips on more than a dozen companies. The jury sided with the prosecution, which alleged that Rajaratnam got tipped off early and often about material, non-public information, such as a company's upcoming quarterly earnings report and pending mergers and acquisitions, and then profited on the information via trades.

Rajaratnam will be sentenced on July 29 and could face significant jail time. The judge set bail of $100 million for the convicted hedge fund manager, who the prosecution argued was a flight risk. Rajaratnam was convicted on five counts of conspiracy and nine counts of securities fraud.

Each of the conspiracy counts carries a maximum of up to five years in prison and each of the fraud counts carries a maximum sentence of 20 years in prison. Rajaratnam faces a maximum prison term of 205 years in total.

In a statement Preet Bharara, the U.S. Attorney for the Southern District of New York, said Rajaratnam's undoing was due to "greed and corruption. The message is there are rules and there are laws and they apply to everyone, no matter who you are and how much money you have."...

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