Saturday, October 17, 2009

“This should serve as a wake-up call for Wall Street”

Insider trading case brought against Raj Rajaratnam, self-made billionaire who founded the Galleon Group

Case is fascinating on multiple levels. Sheer size of the purported network, with unnamed co-conspirators and tipsters, is tantalizing. Who was the unnamed investor-relations employee who allegedly illegally spilled the beans on Google earnings? Who was the Akamai executive who did the same? Moody’s analyst who divulged that Hilton Hotels was about to be acquired by the Blackstone Group ahead of the formal announcement?

Shown above are Danielle Chiesi, former Bear Stearns executive who played a major role in the purported scheme; Robert Moffat of I.B.M. who fed information into the network; Mark Kurland, Ms. Chiesi’s colleague hedge fund New Castle Partners; and Anil Kumar, a McKinsey & Company executive who also tipped the insider traders. The fifth named defendant is Rajiv Goel, an Intel executive.

“This case should serve as a wake-up call for Wall Street,” Preet Bharara, US attorney, said at a news conference. “These people were privy to inside information, but they didn’t know one secret, that we were listening.” Click to go to NYT Recap.

Prosecutors were quick to point to the development as a sign of how seriously they took white-collar crime, using techniques employed in investigations of the Mafia and drug cartels. That they intended today’s case as a shot across the bow of hedge funds is unmistakeable.

Who is Raj Rajaratnam ? As of early 2009 the richest Sri Lankan-born person in the world. He studied engineering at the University of Sussex in England. Rajaratnam moved to the US in 1981 and earned an M.B.A. from Wharton.

Rajaratnam started his career as an analyst at Needham & Co.. Promoted to president in 1991 then launched Galleon six years later. He says his best ideas come from frequent visits with companies and conversations with execs who invest in his fund. Hatip Wikipedia.

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