Galleon's Rajaratnam loses bid to cut insider trading sentence

Reuters News
Posted: Mar 03, 2017 3:01 PM

By Jonathan Stempel

NEW YORK (Reuters) - A federal judge on Friday 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.

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.

She also rejected Rajaratnam's argument that his trial counsel was ineffective, and denied Rajaratnam's bid to reduce the $53.8 million that he had 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, 59, is the highest-profile fund manager targeted in Bharara's sweeping insider trading crackdown, which since 2009 has resulted in more than 80 convictions and guilty pleas.

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 was convicted in May 2011 on nine counts of securities fraud and five counts of conspiracy. He has served 5-1/4 years in prison and will be eligible for release in July 2021.

In seeking a shorter sentence, Rajaratnam said he did not provide benefits to insiders for confidential information related to trades underlying five of the counts or know that insiders provided that information for the sake of any benefit.

On Dec. 6, the U.S. Supreme Court ruled in a separate case that a gift of confidential information could violate securities laws even if the recipient did not give a tangible benefit 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 & Co partner Anil Kumar perjured himself at trial, citing alleged contradictory testimony that Kumar gave three years later at a trial against Rajaratnam's younger brother, Rengan.

Preska said the alleged conflicting testimony was not material, and that "a faulty memory resulting in inaccuracies or mistakes" does not mean perjury occurred.

Rengan Rajaratnam was acquitted in July 2014 of conspiring to engage in insider trading.

The cases are U.S. v. Rajaratnam, U.S. District Court, Southern District of New York, No. 09-cr-01184; and Rajaratnam v U.S. in the same court, No. 15-05325.

(Reporting by Jonathan Stempel in New York; Editing by Leslie Adler)