Rajaratnam Ordered to Pay Hefty $92.8 Penalty, and SEC Woes Continue
UPDATE: SL-USA
A New York federal judge today (Nov 8) ordered Raj Rajaratnam, the Galleon Group hedge fund founder sentenced to 11 years in prison for insider trading, to pay a hefty $92.8 million penalty in a related Securities and Exchange Commission (SEC) civil case.
The penalty imposed by US District Judge Jed Rakoff in Manhattan is in addition to the $63.8 million that Rajaratnam's lawyers said their client has already paid in his criminal case, including $53.8 million that was forfeited and a $10 million fine.
“This case cries out for the kind of civil penalty that will deprive this defendant of a material part of his fortune,” Judge Rakoff wrote in the order.
The penalty does not end Rajaratnam’s SEC troubles. On October 26, the SEC filed a new case against him and Rajat Gupta for extensive insider trading involving Goldman Sachs and Procter & Gamble. The complaint charges Gupta with 'knowingly or recklessly disclosing to Rajaratnam nonpublic information he obtained as a member of the boards of these companies. Using this information, Rajaratnam traded the various Galleon funds he managed, 'generating illicit profits and loss avoidance of more than $23 million.’ Rajaratnam is also accused of passing along information obtained from Gupta to co-conspirators.
The complaint includes a damaging description of how on January 29, 2009, the day before Procter & Gamble released its pre-market quarterly earnings, Gupta called Rajaratnam and provided him with information contained in the draft copy of the earnings he and other board members had received. According to the draft, the company expected organic sales, or sales related to pre-existing rather than newly acquired business segments, to grow 2.5% in the fiscal year. This compared negatively to the 4-6% growth the company had previously predicted and made public. That same day, after receiving Gupta's tipoff, Rajaratnam allegedly advised another co-conspirator of the projected drop in P&G's organic sales growth. Galleon funds sold short 180,000 P&G shares later that afternoon, thereby making a gain or preventing a loss. The next day, P&G stock price fell from $58.22 closing the prior day to $56.50 per share and further declined by the close of January 30 to $54.50. Galleon's illicit profits from trading short the previous day were over $570,000.
Gupta provided such information to Rajaratnam with the expectation of receiving a benefit, the complaint states.
"Rajaratnam knew, recklessly disregarded, or should have known, that the tips he received form Gupta were conveyed by Gupta in breach of Gupta's fiduciary duty, or similar relationship of trust and confidence."
The SEC is seeking to recover all the illicit trading profits plus interest as well as civil monetary penalties.
A New York federal judge today (Nov 8) ordered Raj Rajaratnam, the Galleon Group hedge fund founder sentenced to 11 years in prison for insider trading, to pay a hefty $92.8 million penalty in a related Securities and Exchange Commission (SEC) civil case.
The penalty imposed by US District Judge Jed Rakoff in Manhattan is in addition to the $63.8 million that Rajaratnam's lawyers said their client has already paid in his criminal case, including $53.8 million that was forfeited and a $10 million fine.
“This case cries out for the kind of civil penalty that will deprive this defendant of a material part of his fortune,” Judge Rakoff wrote in the order.
The penalty does not end Rajaratnam’s SEC troubles. On October 26, the SEC filed a new case against him and Rajat Gupta for extensive insider trading involving Goldman Sachs and Procter & Gamble. The complaint charges Gupta with 'knowingly or recklessly disclosing to Rajaratnam nonpublic information he obtained as a member of the boards of these companies. Using this information, Rajaratnam traded the various Galleon funds he managed, 'generating illicit profits and loss avoidance of more than $23 million.’ Rajaratnam is also accused of passing along information obtained from Gupta to co-conspirators.
The complaint includes a damaging description of how on January 29, 2009, the day before Procter & Gamble released its pre-market quarterly earnings, Gupta called Rajaratnam and provided him with information contained in the draft copy of the earnings he and other board members had received. According to the draft, the company expected organic sales, or sales related to pre-existing rather than newly acquired business segments, to grow 2.5% in the fiscal year. This compared negatively to the 4-6% growth the company had previously predicted and made public. That same day, after receiving Gupta's tipoff, Rajaratnam allegedly advised another co-conspirator of the projected drop in P&G's organic sales growth. Galleon funds sold short 180,000 P&G shares later that afternoon, thereby making a gain or preventing a loss. The next day, P&G stock price fell from $58.22 closing the prior day to $56.50 per share and further declined by the close of January 30 to $54.50. Galleon's illicit profits from trading short the previous day were over $570,000.
Gupta provided such information to Rajaratnam with the expectation of receiving a benefit, the complaint states.
"Rajaratnam knew, recklessly disregarded, or should have known, that the tips he received form Gupta were conveyed by Gupta in breach of Gupta's fiduciary duty, or similar relationship of trust and confidence."
The SEC is seeking to recover all the illicit trading profits plus interest as well as civil monetary penalties.
Disgraced Wall Street Billionaire Rajaratnam's Sentence Too Short, According to Poll
UPDATE: SL-USA
Convicted hedge fund dealer Raj Rajaratnam’s 11-year prison term handed by a federal judge Thursday described as the longest for the crime of insider trading fell far short of prosecutors’ expectations and has left many saying it was too short.
Nearly 48% of readers in an online poll conducted by the Wall Street Journal said Raj Rajaratnam’s prison term is too short while, 30% said it’s just about right term, and 22% said it was too long.
Rajaratnam was found guilty on 14 counts of securities fraud and conspiracy by a 12-member jury in May. Prosecutors sought a prison term of not less than 20 years while defense attorney citing health problems and his philanthropic contributions urged the judge to consider a much more lenient sentencing range of 6½ years.
In addition to the prison term, Rajaratnam will pay a fine of $10m, forfeit $53.8m of his illegal gains, and serve two years of supervised release after his prison term is up. The court denied his lawyers’ request for bail pending appeal and he will surrender to authorities on November 28, 2011 to start serving his term . Since there is not parole in the federal prison system, he is likely to serve his entire term with a slight reduction for good behavior.
He still faces a Securities and Exchange Commission lawsuit. Rajaratnam who allegedly gave $5m to the LTTE via the Tamil Rehabilitation Organization (TRO) is also facing a civil lawsuit filed by victims
During the sentencing proceeding, US District Judge Richard Holwell said 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."
Manhattan U.S. Attorney Preet Bharara who has built a reputation going after Wall Street crooks with unprecedented gusto, said that two years earlier Rajaratnam stood at the summit ‘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. “
According to the indictment, from 2003 to March 2009, Rajaratnam repeatedly traded on material, nonpublic information ("Inside Information") pertaining to upcoming earnings forecasts, mergers, acquisitions given as tips by insiders and others at hedge funds, public companies, and investor relations firms – including Goldman Sachs, Intel, and IBM.
The evidence at trial included, among other things, recordings of wiretapped phone calls between Rajaratnam 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.
Chiesi, Kurland, Moffat, Kumar, Goel, Smith and Khan have all pled guilty to their involvement in the insider trading schemes. Chiesi was sentenced to 30 months in prison, Kurland to 27 months, and Moffat to six months in prison. Kumar, Goel, Smith And Khan are awaiting sentencing.
Related Links
Vanity Fair discusses Rajaratnam’s alleged financial support of terrorism
Rajaratnam, TRO & LTTE
Rajaratnam "Criminal Conduct Brazen"
Convicted hedge fund dealer Raj Rajaratnam’s 11-year prison term handed by a federal judge Thursday described as the longest for the crime of insider trading fell far short of prosecutors’ expectations and has left many saying it was too short.
Nearly 48% of readers in an online poll conducted by the Wall Street Journal said Raj Rajaratnam’s prison term is too short while, 30% said it’s just about right term, and 22% said it was too long.
Rajaratnam was found guilty on 14 counts of securities fraud and conspiracy by a 12-member jury in May. Prosecutors sought a prison term of not less than 20 years while defense attorney citing health problems and his philanthropic contributions urged the judge to consider a much more lenient sentencing range of 6½ years.
In addition to the prison term, Rajaratnam will pay a fine of $10m, forfeit $53.8m of his illegal gains, and serve two years of supervised release after his prison term is up. The court denied his lawyers’ request for bail pending appeal and he will surrender to authorities on November 28, 2011 to start serving his term . Since there is not parole in the federal prison system, he is likely to serve his entire term with a slight reduction for good behavior.
He still faces a Securities and Exchange Commission lawsuit. Rajaratnam who allegedly gave $5m to the LTTE via the Tamil Rehabilitation Organization (TRO) is also facing a civil lawsuit filed by victims
During the sentencing proceeding, US District Judge Richard Holwell said 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."
Manhattan U.S. Attorney Preet Bharara who has built a reputation going after Wall Street crooks with unprecedented gusto, said that two years earlier Rajaratnam stood at the summit ‘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. “
According to the indictment, from 2003 to March 2009, Rajaratnam repeatedly traded on material, nonpublic information ("Inside Information") pertaining to upcoming earnings forecasts, mergers, acquisitions given as tips by insiders and others at hedge funds, public companies, and investor relations firms – including Goldman Sachs, Intel, and IBM.
The evidence at trial included, among other things, recordings of wiretapped phone calls between Rajaratnam 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.
Chiesi, Kurland, Moffat, Kumar, Goel, Smith and Khan have all pled guilty to their involvement in the insider trading schemes. Chiesi was sentenced to 30 months in prison, Kurland to 27 months, and Moffat to six months in prison. Kumar, Goel, Smith And Khan are awaiting sentencing.
Related Links
Vanity Fair discusses Rajaratnam’s alleged financial support of terrorism
Rajaratnam, TRO & LTTE
Rajaratnam "Criminal Conduct Brazen"