Friday, November 11, 2011
Rajaratnam faces a record $92 million fine
A New York judge slapped a record $92.8 million fine on Raj Rajaratnam (54), the Sri Lankan born billionaire hedge fund manager convicted in May on 14 counts of insider trading charges. Last month Mr. Rajaratnam was sentenced to 11 years imprisonment for using a network of informants to garner roughly $70 million in illicit profits.
The United States Securities and Exchange Commission said that the amount was "the highest ever ordered against an individual defendant in an SEC insider trading case," and the fine imposed was over and above a $63 million that Mr. Rajaratnam had to pay in the Justice Department’s criminal case.
The action against Mr. Rajaratnam also flushed out a series of high-profile executives in several blue-chip companies in the U.S., who have subsequently been indicted on insider trading charges. The list includes Rajat Gupta and Anil Kumar of consulting firm McKinsey and Company, Rajiv Goel, Managing Director at Intel Capital, Robert Moffat, a Senior Vice President at IBM and Danielle Chiesi, a portfolio manager at New Castle Funds, a New York hedge fund.
In his decision to impose the civil fine, U.S. District Court Judge Jed Rakoff especially highlighted "the huge and brazen nature of Rajaratnam's insider trading scheme," adding that the unprecedented case against him “cries out for the kind of civil penalty that will deprive this defendant of a material part of his fortune.
Similarly Robert Khuzami SEC Head of Enforcement division said, "The penalty imposed today reflects the historic proportions of Raj Rajaratnam’s illegal conduct and its impact on the integrity of our markets."
His words were echoed by Judge Rakoff who emphasised the signal that that SEC civil penalties ought to send out to other would-be insider traders. He said that in cases of "lucrative misconduct" such penalties were designed to make unlawful insider trading "a money-losing proposition not just for this defendant, but for all who would consider it."
Earlier Mr. Rajaratnam’s defence attempted to argue that prosecutors were overstating the amount of illegal profits that he made from the exchange of material non-public information, specifically arguing that Mr. Rajaratnam made “only $7.4 million” from insider trading and such illicit market activities.
Yet U.S. Attorney Preet Bharara however underscored that insider trading continued to be "rampant," on Wall Street and has said that individuals such as Mr. Rajaratnam were "creating a business model for a stable of insider sources... [and it] has been distressing."
Labels: hedge funds, insider trading, Raj Rajaratnam
Saturday, November 05, 2011
Rajaratnam handed 11-year jail sentence
Raj Rajaratnam (54), the billionaire hedge fund manager convicted in May on 14 counts of securities fraud and conspiracy, was handed a 11-year jail term by a Manhattan court on Thursday, said to be the longest sentence imposed for insider trading in New York in twenty years.
Although the prosecution in the two-year case had pushed for a maximum jail term of over 24 years, the Sri- Lankan born boss of the Galleon Group had pleaded for a lenient sentence arguing that given his health problems a long prison term would amount to a “death sentence.”
While conceding that Mr. Rajaratnam’s ill health justified some leniency in sentencing, U.S. District Judge Richard Holwell took on board the arguments of the prosecution that as the “modern face of illegal insider trading,” Mr. Rajaratnam had made over $64 million through his illicit network informants.
However Judge Holwell did refer to Mr. Rajaratnam’s health condition, noting that he was suffering from advanced diabetes and was likely to require a kidney transplant. During the trial Mr.Rajaratnam reportedly missed a courtroom session after undergoing emergency surgery for a bacterial infection in his foot, according to a statement at the time, and he was said to have made “several court appearances this spring wearing a walking boot on his foot.”
Mr. Rajaratnam’s sentencing comes in the wake of other senior officials being charged with crimes relating to insider trading, including Anil Kumar of consulting firm McKinsey and Company, Rajiv Goel, Managing Director at Intel Capital, Robert Moffat, a Senior Vice President at IBM and Danielle Chiesi, a portfolio manager at New Castle Funds, a New York hedge fund.
Recent weeks also saw the sentencing of some of Mr. Rajaratnam’s associates including Emanuel Goffer, who was sentenced to three years in prison for bribing officials of a law firm for insider information; and trader Michael Kimelman, who was sentenced to two-and-a-half years in prison on a similar conviction.
Mr. Rajaratnam’s defence attempted to argue that prosecutors were overstating the amount of illegal profits that he made from the exchange of material non-public information, specifically arguing that Mr. Rajaratnam made “only $7.4 million” from insider trading and such illicit market activities. They pleaded for no more than six to eight years.
The 11-year term for Rajaratnam however marks a clear victory for the U.S. Attorney’s office in New York which, led by Preet Bharara, has taken an aggressive approach towards insider trading during the last two years. Speaking at a recent event at Wharton Business School, from which Mr. Rajaratnam graduated in 1983, Mr. Bharara noted that his office and the Securities and Exchange Commission had together taken down 52 individuals on insider trading charges over the last two years. “Forty-nine of those have pleaded guilty or been convicted by a jury,” according to reports.
Mr. Bharara has however repeatedly underscored that insider trading continued to be “rampant,” and has said that these individuals were “creating a business model for a stable of insider sources... [and it] has been distressing.”
Labels: Galleon founder, hedge funds, insider trading, Raj Rajaratnam
Rajaratnam faces 25-year jail sentence
Raj Rajaratnam (54), the billionaire hedge fund manager convicted in May on 14 counts of securities fraud and conspiracy, this week faces a range of possible jail terms from 19 years and seven months to 24 years and six months as per recommendations of prosecutors in the case against him in New York.
Prior to sentencing, which will occur on October 13, prosecutors pressed for a longer jail term given current federal sentencing guidelines and the “historic nature of his crimes,” from which they alleged Mr. Rajaratnam made in excess of $70 million.
However, according to his own legal team the Sri-Lankan born boss of the Galleon Group allegedly made “only $7.4 million” from insider trading and such illicit market activities. They pleaded for no more than six to eight years.
In particular Terence Lynam, Mr Rajaratnam’s attorney was said to have argued that the government was “sweeping in all market movements,” and that they disputed the government’s calculation of the profits that Mr. Rajaratnam made.
Specifically the prosecution’s methodology included “trades that were made after the time when the news of earnings or a takeover was announced,” reports said, noting that in some instances, Mr Rajaratnam “did not sell his entire stake on the day of the news.”
Yet according to reports if the judge’s request to assume Mr. Rajaratnam sold his entire position on the day of the news was followed then his total profits still exceeded $50m. “Under the sentencing guidelines, one threshold for gains is $50m to $100m, so that change would not alter the government’s sentencing recommendation,” reports said.
Instead, prosecutors argued, Mr. Rajaratnam ought to serve between 235 and 293 months, or a minimum sentence of 19 years and seven months, based on the fact that he was a “serial insider trader” who headed a major conspiracy and obstructed the government’s investigation during an interview with the Securities and Exchange Commission.
Labels: Galleon founder, insider trading, Raj Rajaratnam
Friday, March 25, 2011
Top Indian-American executive charged with insider trading
From The Hindu
Rajat Gupta (62), a former Managing Director of consulting giant McKinsey and Company and independent Director at banking conglomerate Goldman Sachs, has been charged with insider trading by the United States Security and Exchange Commission.
In an order instituting cease-and-desist proceedings against Gupta, the market regulator alleged that he illegally tipped off Galleon Management founder and hedge fund manager Raj Rajaratnam with inside information on the quarterly earnings at Goldman Sachs and Procter & Gamble and also an impending $5 billion investment by Berkshire Hathaway in Goldman.
The charges brought by the SEC’s Division of Enforcement further alleged that Gupta supplied Rajaratnam, who is already facing impending trial proceedings for insider trading, with “material non-public information” that Gupta obtained during calls with management boards of Goldman Sachs and Proctor & Gamble.
Subsequently, the SEC said, “Rajaratnam used the inside information to trade on behalf of some of Galleon’s hedge funds, or shared the information with others at his firm who then traded on it ahead of public announcements by the firms.”
This trading activity resulted in Rajaratnam and others generating more than $18 million in illicit profits and loss avoidance, the SEC noted, pointing out that Gupta was at the time a direct or indirect investor in at least some of these Galleon hedge funds, and had other potentially lucrative business interests with Rajaratnam.
Robert Khuzami, Director of the SEC’s Division of Enforcement, said “Gupta was honoured with the highest trust of leading public companies, and he betrayed that trust by disclosing their most sensitive and valuable secrets,” adding, “Directors who violate the sanctity of board room confidences for private gain will be held to account for their illegal actions.”
The order against Gupta went on to cite specific instances of large scale fraud by Gupta, including an allegation that while Gupta was a member of Goldman’s Board of Directors, Gupta he illicitly passed on information to Rajaratnam about Berkshire Hathaway’s $5 billion investment in Goldman Sachs and Goldman Sachs’ upcoming public equity offering before that information was publicly announced on September 23, 2008.
The SEC order said, “Gupta called Rajaratnam immediately after a special telephonic meeting at which Goldman’s Board considered and approved Berkshire’s investment in Goldman Sachs and the public equity offering.” It added that within a minute after the Gupta-Rajaratnam call and just minutes before the close of the markets, Rajaratnam arranged for Galleon funds to purchase more than 175,000 Goldman shares, leading to Rajaratnam making illicit profits of more than $900,000.
Under the administrative proceedings to follow the imposition of the SEC’s charges, authorities will determine what relief, if any, is in the public interest against Gupta, including “disgorgement of ill-gotten gains, prejudgment interest, financial penalties, an officer or director bar, and other remedial relief,” the SEC order said.
Labels: Goldman Sachs, hedge fund probe, insider trading, P and G, Raj Rajaratnam, SEC
Tuesday, November 23, 2010
Wall Street firms on FBI scanner
From The Hindu
The Federal Bureau of Investigation is poised to launch an unprecedented barrage of criminal and civil charges relating to insider trading against leading Wall Street organisations including investment bankers, hedge-fund and mutual-fund traders and consultants and analysts.
According to a report by the Wall Street Journal which quoted unnamed federal authorities, the culmination of a three-year investigations by the FBI will “expose a culture of pervasive insider trading in U.S. financial markets, including new ways non-public information is passed to traders through experts tied to specific industries or companies.”
Authorities also added that the impact of their probe on the financial industry would “eclipse” that of any previous such investigation, especially given their focus on multiple insider-trading rings reaping illegal profits to the tune of tens of millions of dollars.
Two firms mentioned by the government sources, Goldman Sachs Group and Primary Global Research, refused to comment when asked about whether they were being investigated. Goldman Sachs is a major Wall Street investment bank and trading company and Primary Global is a California firm that “connects experts with investors seeking information in the technology, health-care and other industries.”
The Wall Street Journal report also quoted an email from John Kinnucan, a principal at Broadband Research, in which he warned 20 hedge fund and mutual fund clients of a visit by the FBI.
“Today two fresh faced eager beavers from the FBI showed up unannounced (obviously) on my doorstep thoroughly convinced that my clients have been trading on copious inside information,” he said, adding, “We obviously beg to differ, so have therefore declined the young gentleman's gracious offer to wear a wire and therefore ensnare you in their devious web.”
The FBI investigation comes even as U.S. Attorney Preet Bharara of Manhattan, New York, kept up the pressure on the insider trading issue. Exactly a year ago Mr. Bharara brought insider trading charges against 14 high-profile Wall Street bankers and consultants including Raj Rajaratnam of Galleon Management, Rajiv Goel of the investment arm of Intel Corporation, Anil Kumar of McKinsey and Company and Robert Moffat of IBM.
All 14 were charged with participating in insider trading schemes that “together netted more than $20 million in illegal profits,” the FBI said, and that case represented the first time that court-authorized wiretaps were used to target significant insider trading on Wall Street.
Earlier this month Mr. Bharara announced that Ali Hariri, a former executive at Atheros Communications, had been sentenced to 18 months in prison for his participation in the “largest hedge fund insider trading case in history.” In that case the court also imposed a two-year term of supervised release and a $50,000 fine.
The Federal Bureau of Investigation is poised to launch an unprecedented barrage of criminal and civil charges relating to insider trading against leading Wall Street organisations including investment bankers, hedge-fund and mutual-fund traders and consultants and analysts.
According to a report by the Wall Street Journal which quoted unnamed federal authorities, the culmination of a three-year investigations by the FBI will “expose a culture of pervasive insider trading in U.S. financial markets, including new ways non-public information is passed to traders through experts tied to specific industries or companies.”
Authorities also added that the impact of their probe on the financial industry would “eclipse” that of any previous such investigation, especially given their focus on multiple insider-trading rings reaping illegal profits to the tune of tens of millions of dollars.
Two firms mentioned by the government sources, Goldman Sachs Group and Primary Global Research, refused to comment when asked about whether they were being investigated. Goldman Sachs is a major Wall Street investment bank and trading company and Primary Global is a California firm that “connects experts with investors seeking information in the technology, health-care and other industries.”
The Wall Street Journal report also quoted an email from John Kinnucan, a principal at Broadband Research, in which he warned 20 hedge fund and mutual fund clients of a visit by the FBI.
“Today two fresh faced eager beavers from the FBI showed up unannounced (obviously) on my doorstep thoroughly convinced that my clients have been trading on copious inside information,” he said, adding, “We obviously beg to differ, so have therefore declined the young gentleman's gracious offer to wear a wire and therefore ensnare you in their devious web.”
The FBI investigation comes even as U.S. Attorney Preet Bharara of Manhattan, New York, kept up the pressure on the insider trading issue. Exactly a year ago Mr. Bharara brought insider trading charges against 14 high-profile Wall Street bankers and consultants including Raj Rajaratnam of Galleon Management, Rajiv Goel of the investment arm of Intel Corporation, Anil Kumar of McKinsey and Company and Robert Moffat of IBM.
All 14 were charged with participating in insider trading schemes that “together netted more than $20 million in illegal profits,” the FBI said, and that case represented the first time that court-authorized wiretaps were used to target significant insider trading on Wall Street.
Earlier this month Mr. Bharara announced that Ali Hariri, a former executive at Atheros Communications, had been sentenced to 18 months in prison for his participation in the “largest hedge fund insider trading case in history.” In that case the court also imposed a two-year term of supervised release and a $50,000 fine.
Labels: FBI, Goldman Sachs, hedge-fund, insider trading, investment bankers, mutual-fund, Primary Global, Wall Street
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