Another Poster Hedgie Child - Getting in on the D/L on goog

http://news.yahoo.com/s/ap/20091016/ap_on_bi_ge/us_hedge_fund_insider_trading_8


NEW YORK – One of
America's wealthiest men was among six hedge fund managers and
corporate executives arrested Friday in a hedge fund insider trading
case that prosecutors say reaped more than $20 million in illegal
profits and should be a wake-up call for Wall Street.
Raj Rajaratnam, a partner in Galleon
Management and a portfolio manager for Galleon Group, a hedge fund with
up to $7 billion in assets under management, was accused of conspiring
with others to trade based on insider information about several
publicly traded companies, including Google Inc.
U.S.
Attorney Preet Bharara, putting total profits in the scheme at $20.6
million, told a news conference it was the largest hedge fund case ever
prosecuted and marked the first use of court-authorized wiretaps to
capture conversations by suspects in an insider trading case.
He said the case should cause financial professionals considering insider trades in the future to wonder whether law enforcement is listening.
"Greed is not good," Bharara said. "This case should be a wake-up call for Wall Street."
Robert Khuzami, director of enforcement at the Securities and Exchange Commission, said the charges show Rajaratnam's "secret of success was not genius trading strategies."
"He is not the master of the universe. He is a master of the Rolodex," Khuzami said.
Rajaratnam,
52, was ranked No. 559 by Forbes magazine this year among the world's
wealthiest billionaires, with a $1.3 billion net worth.
Rajaratnam — born in Sri Lanka and a graduate of University of Pennsylvania's Wharton School of Business — has been described as a savvy manager of billions of dollars in technology and health-care hedge funds at Galleon, which he started in 1996. The firm is based in New York City with offices in California, China, Taiwan and India. He lives in New York.
According to a criminal complaint filed in U.S. District Court in Manhattan,
Rajaratnam obtained insider information and then caused the Galleon
Technology Funds to execute trades that earned a profit of more than
$12.7 million between January 2006 and July 2007. Other schemes
garnered millions more, authorities said.
A spokesman for Rajaratnam did not immediately return a phone call for comment Friday.
The
timing of the arrests might be explained by a footnote in the complaint
against Rajaratnam. In it, an FBI agent said he had learned that
Rajaratnam had been warned to be careful and that Rajaratnam, in
response, had said that a former employee of the Galleon Group was
likely be wearing a "wire."
The agent said he learned from federal authorities that Rajaratnam had obtained a plane ticket to fly from Kennedy International Airport to London on Friday and to return to New York from Geneva, Switzerland next Thursday.
Also charged in the scheme are Rajiv Goel, 51, of Los Altos, Calif., a director of strategic investments at Intel Capital, the investment arm of Intel Corp., Anil Kumar, 51, of Santa Clara, Calif., a director at McKinsey & Co. Inc., a global management consulting firm, and Robert Moffat, 53, of Ridgefield, Conn., senior vice president and group executive at International Business Machines Corp.'s Systems and Technology Group.
The
others charged in the case were identified as Danielle Chiesi, 43, of
New York City, and Mark Kurland, 60, also of New York City.
According to court papers, Chiesi worked for New Castle, the equity hedge fund group of Bear Stearns Asset Management Inc. that had assets worth about $1 billion under management. Kurland is a top executive at New Castle.
A criminal complaint filed in the case shows that an unidentified person
involved in the insider trading scheme began cooperating and
authorities obtained wiretaps of conversations between the defendants.
In
one conversation about a pending deal that was described in a criminal
complaint, Chiesi is quoted as saying: "I'm dead if this leaks. I
really am. ... and my career is over. I'll be like Martha (expletive)
Stewart."
Stewart, the homemaking maven, was convicted in 2004 of lying
to the government about the sale of her shares in a friend's company
whose stock plummeted after a negative public announcement. She served
five months in prison and five months of home confinement.
Prosecutors charged those arrested Friday with conspiracy and securities fraud.
It was not immediately clear who was representing the defendants in court appearances scheduled for U.S. District Court in Manhattan later Friday.
A separate criminal complaint in the case said Chiesi and Moffat conspired to engage in insider trading in the securities of International Business Machines Corp.
According to a criminal complaint in the case, Chiesi and
Rajaratnam were heard on a government wiretap of a Sept. 26, 2008 phone
conversation discussing whether Chiesi's friend Moffat should move from
IBM to a different technology company to aid the scheme.
"Put him in some company where we can trade well," Rajaratnam was quoted in the court papers as saying.
The complaint said Chiesi replied: "I know, I know. I'm thinking
that too. Or just keep him at IBM, you know, because this guy is giving
me more information. ... I'd like to keep him at IBM right now because
that's a very powerful place for him. For us, too."
According to the court papers, Rajaratnam replied: "Only if he
becomes CEO." And Chiesi was quoted as replying: "Well, not really. I
mean, come on. ... you know, we nailed it."
The criminal complaints in the case also captured what
authorities said were efforts by the defendants to hide their
conversations from authorities.
In one conversation, Chiesi was heard telling Rajaratnam that
she was "glad that we talk on a secure line, I appreciate that," to
which Rajaratnam replied: "I never call you on my cell phone," the
complaint said. It added that Chiesi said she was "nervous" about being
investigated.
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Associated Press Writer Tom Hays in Riverside, Calif., and AP Business Writer Candice Choi in New York contributed to this story.