Tags: US | Hedge | Fund | Insider | Trading

New Indictment Boosts Charges Against Galleon Founder

Wednesday, 10 Feb 2010 02:13 PM

Federal prosecutors have boosted their insider trading charges case against the man they say was behind history's largest hedge fund insider trading case.

The rewritten indictment accuses Galleon Group founder Raj Rajaratnam of making up to $45 million from trades based on secrets. A prosecutor has said in court that the total of his illicit gains may top $50 million.

The indictment adds two securities fraud charges against Rajaratnam. It also expands the time frame for some of the alleged crimes from months to years.

The fresh indictment resulted from what prosecutors say they learned as a result of some defendants who have pleaded guilty in a case that has resulted in charges against 21 people, many of them formerly high-level executives with major corporations.

Rajaratnam, 52, has denied the charges that were first brought with his October arrest. Once described as one of wealthiest men in the United States, Rajaratnam remains free on $100 million bail.

Dan Gagnier, a spokesman for Rajaratnam, declined to comment Tuesday.

If prosecutors win conviction, they say he could now face up to 185 years in prison. Previously he faced 145 years.

The indictment also strengthened allegations against a co-defendant, Danielle Chiesi, who, like Rajaratnam, has pleaded not guilty to charges in the case. If convicted, the 44-year-old Chiesi could face 155 years in prison

Prosecutors are also seeking the forfeiture of $49 million — $45 million of which they say was made illegally by Rajaratnam and $4 million of which they say was illegally made by Chiesi. When the pair was first indicted, prosecutors had sought $20.8 million.

Both Rajaratnam and Chiesi live in Manhattan. A message left with a lawyer for Chiesi was not immediately returned Tuesday.

The new charges grew from guilty pleas in recent weeks by Anil Kumar and Rajiv Goel, among others. In all, nine people have pleaded guilty in the case.

Goel, 51, of Los Altos, Calif., who pleaded guilty this week, was a director of strategic investments at Intel Capital, the investment arm of microprocessor maker Intel Corp., until his October arrest.

Prosecutors say he tipped Rajaratnam in April 2007 about Intel's quarterly earnings before the company's public announcement. He said during his plea that he did so because of his personal friendship with Rajaratnam.

Prosecutors say Rajaratnam made at least $3 million in illegal profits as a result of information Goel gave him.

In the same manner, prosecutors said, Rajaratnam made money from tips between 2003 through last October from Anil Kumar, 51, of Saratoga, Calif., a then-senior partner and director at McKinsey & Co. Prosecutors say Rajaratnam made at least $24.5 million from secrets provided by Kumar.

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