Danielle Chiesi:The founder of the Galleon Group, a big New York hedge fund, was charged on Friday with insider trading in the stocks of several companies, including Advanced Micro Devices, Clearwire and Akamai, earning about $20 million in the process.
Federal prosecutors for the Southern District of New York accused Raj Rajaratnam, 51, with illegally obtaining and trading on information on these companies, which also included Polycom, Hilton Hotels, Google and People Support. He was charged with four counts of conspiracy and nine counts of securities fraud. (Read the complaints after the jump.)
Others charged by prosecutors include Mark Kurland, the president of New Castle Partners, another large money manager; Danielle Chiesi, a former Bear Stearns executive who now works at New Castle; Rajiv Goel, an executive at Intel Capital, the venture capital arm of Intel; Anil Kumar, an executive at McKinsey & Company; and Robert Moffatt, an executive at I.B.M.
All six were arrested Friday morning. Five of the six are set to be arraigned in federal court in Manhattan Friday afternoon. Mr. Goel is set to be arraigned in California.
The prosecutors’ case is built on both statements from an unnamed cooperating witness, who has agreed to plead guilty, and from the recording of four conversations between the witness and Mr. Rajaratnam. The unnamed witness began conversations with the Federal Bureau of Investigation in 2007, which led to the phone taps.
According to the complaint, the witness first approached Mr. Rajaratnam in mid-2005 about divulging nonpublic information. That led to a scheme that ran from January 2006 through July 2007 involving insider information about three companies — Polycom, Hilton and Google — in which the hedge fund executive garnered about $12.7 million in profit. Mr. Rajaratnam reciprocated by supplying inside information about other technology companies.
Mr. Rajaratnam partnered with the likes of Mr. Goel and Mr. Kumar, who supplied information about their portfolio companies or clients, and in turn made profitable trades for these associates.
A spokesman for Galleon said in a statement: “Galleon was shocked to learn today that Raj Rajaratnam was arrested this morning at his apartment. We had no knowledge of the investigation before it was made public and we intend to cooperate fully with the relevant authorities. Galleon continues to operate and is highly liquid.”
Mr. Rajaratnam, a native of Sri Lanka, is listed as No. 551 on Forbes’s 2009 list of the world’s richest people, with an estimated net worth of $1.3 billion.
– Michael J. de la Merced
