Sri Lankan Tamil-origin billionaire Raj Rajaratnam has pleaded not guilty before a court here to running an insider trading scam that allegedly racked upto $21 million in profits, the biggest such case in the US.
Rajaratnam, founder of the Galleon Group and hedge fund operator, is accused of operating an elaborate insider trading operation in tech and other stocks through his hedge fund. The scam is said to be the biggest hedge-fund insider trading case in the US.
Four Indian-Americans have also been charged in the case. "Rajaratnam is innocent, and looks forward to his day in court when a jury of his fellow citizens will examine and evaluate all of the evidence," his lawyer John Dowd was quoted as saying.
Rajaratnam is also accused of providing financial support to a charity linked to the Liberation Tigers of Tamil Eelam. On bail, Rajaratnam also urged the court to reduce his $100 million security to $25 million. He faces 20 years of imprisonment if found convicted.
A federal grand jury had last week formally indicted Rajaratnam and his colleague Danielle Chiesi of numerous counts of securities fraud and conspiracy. "My daughter is innocent and that is what you will be printing," Gloria Chiesi, Danielle Chiesi's mother, told The Wall Street Journal after the hearing.
During the hearing while the prosecutors pressed for an early date, the lawyers of Rajaratnam and Chiesi urged the judge that they need more time to prepare for the trial as they have to listen to the more than 100 hours of tapes which was recorded by the federal investigating agencies.
According to the 17-count indictment filed against them last week, Rajaratnam, Chiesi and others repeatedly traded on material, nonpublic information pertaining to upcoming earnings forecasts, mergers, acquisitions, or other business combinations (inside information).
The inside information was given as tips by insiders and others at hedge funds, public companies, and firms -- including Intel, IBM, McKinsey & Company (McKinsey), Akamai Technologies, Inc. (Akamai) and Polycom, Inc. (Polycom).
As a result of their insider trading, Rajaratnam, Chiesi, and others earned millions of dollars of illegal profits for themselves and the hedge funds with which they were affiliated.
Rajaratnam engaged in overlapping schemes with Ali Far and Roomy Khan -- both of whom have pleaded guilty to insider trading charges and are cooperating with the government -- as well as Chiesi and other co-conspirators to trade on the basis of inside information in several publicly traded companies.
Specifically, the accused engaged in insider trading in Polycom, Hilton Hotels Corp. (Hilton), Google Inc. (Google), Clearwire Corporation (Clearwire), Akamai, Advanced Micro Devices (AMD), and PeopleSupport, Inc. (PeopleSupport).
Among other things, telephone conversations between Rajaratnam and Chiesi, intercepted based on court-authorised wiretaps of phones, revealed that Rajaratnam, Chiesi and others routinely received Inside Information directly or indirectly from insiders and provided it to each other for the purpose of trading based on the information.
For example, from January 2006 until July 2007, Rajaratnam and others engaged in schemes to trade on the basis of Inside Information pertaining to Polycom, Hilton, and Google.
Rajaratnam obtained Inside Information relating to these companies from Khan who, in turn, obtained this information from various inside sources.
Based on trading related to information about these entities, Rajaratnam caused Galleon to earn a total profit of more than $12.7 million. In exchange for the 'inside information' Rajaratnam received from Khan, Rajaratnam provided Khan with inside information on a number of companies.
