on Friday with insider trading in the stocks of several companies,
including Advanced Micro Devices, Clearwire and Akamai, earning about
$20 million in the process.
Federal prosecutors for the Southern District of New York accused Raj
Rajaratnam, 51, with illegally obtaining and trading on information on
these companies, which also included Polycom, Hilton Hotels, Google and
People Support. He was charged with four counts of conspiracy and nine
counts of securities fraud. (Read the complaints after the jump.)
Others charged by prosecutors include Mark Kurland, the president of New
Castle Partners, another large money manager; Danielle Chiesi, a former
Bear Stearns executive who now works at New Castle; Rajiv Goel, an
executive at Intel Capital, the venture capital arm of Intel; Anil
Kumar, an executive at McKinsey & Company; and Robert Moffatt, an
executive at I.B.M.
All six were arrested Friday morning. Five of the six are set to be
arraigned in federal court in Manhattan Friday afternoon. Mr. Goel is
set to be arraigned in California.
The prosecutors' case is built on both statements from an unnamed
cooperating witness, who has agreed to plead guilty, and from the
recording of four conversations between the witness and Mr. Rajaratnam.
The unnamed witness began conversations with the Federal Bureau of
Investigation in 2007, which led to the phone taps.
According to the complaint, the witness first approached Mr. Rajaratnam
in mid-2005 about divulging nonpublic information. That led to a scheme
that ran from January 2006 through July 2007 involving insider
information about three companies — Polycom, Hilton and Google — in
which the hedge fund executive garnered about $12.7 million in profit.
Mr. Rajaratnam reciprocated by supplying inside information about other
technology companies.
Mr. Rajaratnam partnered with the likes of Mr. Goel and Mr. Kumar, who
supplied information about their portfolio companies or clients, and in
turn made profitable trades for these associates.
A spokesman for Galleon said in a statement: "Galleon was shocked to
learn today that Raj Rajaratnam was arrested this morning at his
apartment. We had no knowledge of the investigation before it was made
public and we intend to cooperate fully with the relevant authorities.
Galleon continues to operate and is highly liquid."
Mr. Rajaratnam, a native of Sri Lanka, is listed as No. 551 on Forbes's
2009 list of the world's richest people, with an estimated net worth of
$1.3 billion.
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