Galleon insider-dealing trial opens in New York
Thursday 10 March 2011
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The Wall Street hedge fund giant Raj Rajaratnam "knew tomorrow's business news today", thanks to a network of high-level insider tipsters, a jury was told, as the largest insider trading trial in a generation got under way in Manhattan.
The Galleon founder reaped millions of dollars in illegal profits before the FBI closed in on him, using wiretaps to catch him in incriminating conversation, it was alleged. And in the final days of the conspiracy, as Mr Rajaratnam began to suspect he was being bugged, he ordered an associate to use a pre-paid mobile phone to try to avoid detection.
The prosecution case was set out last night by Assistant US Attorney Jonathan Streeter, 17 months after Mr Rajaratnam's arrest shocked Wall Street and signalled US authorities' determination to root out and punish insider trading across the industry.
"He exploited a corrupt network of people," Mr Streeter told the panel of 12 jurors and six alternates. "Using this network, he bought business information. Using this network, he had his employees go out and bring information to him. This was all information that ordinary peopledidn't have."
Mr Rajaratnam, 53, denies insider trading, and his defence team has argued that prosecutors are trying to criminalise routine, thorough investment research.
But Mr Streeter said Galleon's traders time and time again placed bets on shares knowing the details of animminent, market-moving announcement.
In one case, Rajat Gupta, a Goldman Sachs board member, tipped Mr Rajaratnam about an investment in the bank by Warren Buffett at the height of the credit crisis in 2008. Mr Gupta phoned Mr Rajaratnam two minutes after learning about the investment, Mr Streeter said, and two minutes after that, Galleon bought $43m of Goldman stock, reaping $1m profit. "$1m, two minutes," Mr Streeter said.
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