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March 6, 2017
A US federal judge has rejected Galleon Group hedge fund founder Raj Rajaratnam’s bid to void much of his insider trading conviction and shorten his 11-year prison sentence, Reuters reported.
U.S. District Judge Loretta Preska in Manhattan said Rajaratnam failed to show his actual innocence on five of the 14 counts on which he was convicted, or that two other counts should be vacated because the main government witness committed perjury.
Preska also rejected Rajaratnam’s argument that his trial counsel was ineffective, and denied Rajaratnam’s bid to reduce the $53.8 million he agreed to forfeit to about $4.3 million.
Christine Chung, a lawyer for Rajaratnam, did not immediately respond to requests for comment. U.S. Attorney Preet Bharara in Manhattan declined to comment through a spokeswoman.
Rajaratnam is the highest-profile fund manager convicted in Bharara’s crackdown on insider trading, which since 2009 has led to more than 80 convictions and guilty pleas, including a guilty plea from billionaire Steven A. Cohen’s SAC Capital Advisors LP.
Prosecutors said Rajaratnam made up to $63.8 million from 2003 to 2009 through insider trading in stocks such as eBay Inc (EBAY.O), Goldman Sachs Group Inc (GS.N) and Google Inc, now called Alphabet Inc (GOOGL.O).
Rajaratnam, 59, was convicted in May 2011 on nine securities fraud counts and five conspiracy counts. He has served 5-1/4 years in prison and is eligible for release in July 2021.
Former McKinsey & Co chief and Goldman director Rajat Gupta is awaiting a federal appeals court decision on whether to reverse his conviction for providing tips about Goldman.
In seeking a shorter sentence, Rajaratnam said he did not provide benefits to insiders for confidential information related to trades underlying five counts, or know that insiders provided that information for the sake of any benefit.
But on Dec. 6, the U.S. Supreme Court ruled in a separate case that gifts of confidential information could violate securities laws even if recipients did not give tangible benefits in return.
Preska wrote: “Here, because all the information was transferred between trading relatives or friends, the mere transfer of information is sufficient to constitute a benefit.”
Rajaratnam, moreover, “had knowledge that inside information was being conferred in exchange for such benefit,” she added.
The judge also rejected Rajaratnam’s claim that former McKinsey partner Anil Kumar perjured himself, citing alleged contradictory testimony Kumar gave three years later at a trial of Rajaratnam’s younger brother Rengan, who was acquitted.
Preska said the alleged contradictions were immaterial, and that “a faulty memory resulting in inaccuracies or mistakes” did not mean perjury occurred.