(Bloomberg News) Raj Rajaratnam, the hedge-fund tycoon and Galleon Group LLC co-founder at the center of a U.S. insider-trading crackdown, was found guilty of all 14 counts against him in the largest illegal stock-tipping case in a generation.
A jury of eight women and four men in Manhattan returned its verdict today after hearing evidence that Rajaratnam, 53, engaged in a seven-year conspiracy to trade on illegal tips from corporate executives, bankers, consultants, traders and directors of public companies including Goldman Sachs Group Inc. He gained $63.8 million, prosecutors said.
The trial came as Manhattan U.S. Attorney Preet Bharara promised to crack down on "rampant" illegal trading on Wall Street. Rajaratnam was convicted on five counts of conspiracy and nine counts of securities fraud. Conspiracy carries a maximum sentence of five years; securities fraud can bring 20 years in prison.
"He joins the pantheon of Ivan Boesky and Gordon Gekko," said Peter Henning, a professor at Wayne State University Law School in Detroit, citing both the real-life stock trader who was jailed after pleading guilty to conspiracy in 1987 and the fictional "Wall Street" film character who came to symbolize the financial scandals of the 1980s. "It is a defining case," Henning, a former federal prosecutor, said before the verdict was handed down.
As Rajaratnam entered the courtroom today before the verdict was read, he tugged at his white shirt collar. One of his lawyers, John Dowd, patted him on the shoulder as they walked in. After the verdict, Rajaratnam was allowed to remain free on bail with electronic monitoring pending sentencing.
Galleon was among the 10 largest hedge funds in the world in the early years of the last decade. It managed $7 billion at its peak in 2008. Rajaratnam's net worth of $1.3 billion made him the 559th richest person in the world, Forbes Magazine said in 2009.
Before his arrest on Oct. 16, 2009, Rajaratnam had claimed that Galleon analysts had an advantage over rivals because most were trained as engineers and all focused their energies exclusively on research. At the trial, his lawyers said his trades were based on Galleon research.
"They don't get blindsided by the marketing hype," Rajaratnam said of his analysts in "The New Investment Superstars: 13 Great Investors and Their Strategies for Superior Returns," by Lois Peltz.
'Getting the Number'
Adam Smith, a former Galleon trader, testified at the trial that the New York-based hedge fund gained its advantage through other means. Rajaratnam emphasized "getting the number" -- or learning revenue figures before they became public -- from insiders at Intel Corp., Intersil Corp. and other publicly traded companies, he said.