Galleon founder guilty of massive insider trading

NEW YORK—Once powerful hedge fund founder Raj Rajaratnam was convicted Wednesday on all counts of fraud and conspiracy in Wall Street’s biggest insider trading trial for years.

The New York federal jury found Sri Lankan-born Rajaratnam, head of the Galleon Group, guilty on all 14 counts. Rajaratnam, 53, faces up to 205 years in prison if the judge decides to run all separate penalties consecutively.

The marathon case, which ended with 12 days of jury deliberations, was seen as a huge assault by the Justice Department on Wall Street corruption and what prosecutors termed “greed.”

Rajaratnam was accused of earning $63.8 million on the basis of illegal tips from executives and other company insiders to give him an extra edge in the fast-paced world of hedge fund trading.

Judge Richard Holwell freed Rajaratnam on bail and set a sentencing date of July 29. Lead defense attorney John Dowd told AFP that he will file an appeal.

Rajaratnam, a brilliant dealer who became a billionaire at Galleon, remained as calm and outwardly relaxed as he has throughout the trial. After the verdict, he even smiled as he talked to his lawyers.

Prosecutors asked Holwell to send the fallen Wall Street star directly behind bars, saying he was likely to attempt to escape before sentencing.

“He should be detained,” a prosecutor said. “He has a tremendous incentive to flee.”

The prosecutor noted that Rajaratnam might never come back if he was able to travel to his native Sri Lanka. “In 22 years of the extradition treaty, not a single Sri Lankan has been extradited (to the United States),” he said.

However, defense attorneys said Rajaratnam posed no flight risk. “Ninety-five percent of his assets are in this country,” his lawyer told the judge.

More than two dozen others have been caught up in the Galleon probe, which – unusually for a financial fraud case – featured extensive use of telephone wire taps.

Rajaratnam pleaded not guilty, insisting his deals were based exclusively on legitimate, although intense research into the market, rather than on insider tips, or what prosecutors called “cheating.”

The trial featured testimony from former colleagues and associates who have pleaded guilty to insider trading and cooperated with prosecutors against Rajaratnam in hopes of being given more lenient sentences themselves.

The court also heard damning wire tapped phone calls in which Rajaratnam could be heard discussing confidential company information, such as future earnings announcements and merger plans.

Manhattan US Attorney Preet Bharara, the chief prosecutor who made this case a priority, said: “Raj Rajaratnam, once a high-flying billionaire and hedge fund manager, is now a convicted felon, 14 times over.

“Rajaratnam was among the best and the brightest, one of the most educated, successful and privileged professionals in the country. Yet, like so many others recently, he let greed and corruption cause his undoing.”

The man most commonly known by the simple Raj was found guilty of five counts of conspiracy to commit securities fraud and nine counts of securities fraud. Each conspiracy count carries a maximum sentence of five years in prison, while each securities count carries a maximum sentence of 20 years in prison and a fine of $5 million.

An appeal, analysts say, will likely focus on the use of wire taps, which are highly unusual in white collar cases and seen mostly in investigations of violent criminals such as mobsters.