Insider trading case triggers arrests of six
Scheme generated $25 million in profits, SEC says
NEW YORK – One of America’s wealthiest men was among six hedge fund managers and corporate executives arrested Friday in a hedge fund insider trading case that authorities say generated more than $25 million in illegal profits.
Raj Rajaratnam, 52, a portfolio manager for Galleon Group, a hedge fund with up to $7 billion under management, was accused of conspiring with others to use insider information to trade securities in several publicly traded companies, including Google Inc.
U.S. Attorney Preet Bharara told a news conference it was the largest hedge fund case ever prosecuted and marked the first use of court-authorized wiretaps to capture conversations by suspects in an insider trading case.
The Securities and Exchange Commission, which brought separate civil charges, said the scheme generated more than $25 million in illegal profits.
Robert Khuzami, director of enforcement at the SEC, said the charges show Rajaratnam’s “secret of success was not genius trading strategies.”
“He is not the master of the universe. He is a master of the Rolodex,” Khuzami said.
Rajaratnam was ranked No. 559 by Forbes magazine this year among the world’s wealthiest people, with a $1.3 billion net worth.
The Associated Press has learned that even before his arrest, Rajaratnam, who has both U.S. and Sri Lankan citizenship, was under scrutiny for helping bankroll Sri Lankan militants notorious for suicide bombings.
Also charged in the scheme are Rajiv Goel, 51, of Los Altos, Calif., a director of strategic investments at Intel Capital, the investment arm of Intel Corp.; Anil Kumar, 51, of Santa Clara, Calif., a director at McKinsey & Co. Inc., a global management consulting firm; and Robert Moffat, 53, of Ridgefield, Conn., senior vice president and group executive at International Business Machines Corp.’s Systems and Technology Group.
The others charged in the case were identified as Danielle Chiesi, 43, of New York City, and Mark Kurland, 60, also of New York City.
According to court papers, Chiesi worked for New Castle, the equity hedge fund group of Bear Stearns Asset Management Inc. that had assets worth about $1 billion under management. Kurland is a top executive at New Castle.