More charges in historic insider trading case; defendants on political donor lists
Thursday, February 11, 2010 at 2:44PM By Kay B. Day*
Crime certainly paid well for financiers involved in what the US Dept. of Justice called the largest hedge fund insider trading case in history. One defendant Raj Rajaratnam appeared to give generously to Democrat candidates including President Barack Obama. Danielle Chiesi's name appears as donor to the Republican Congressional Committee but the donations to the Democrats outpace those to the GOP by thousands and thousands of dollars [See charts following this article.]
Rajaratnam gave Democrats more than $80,000 while Chiesi gave the GOP Congressional Committee approximately $5,000.
The government has filed more charges against Raj Rajaratnam and Danielle Chiesi in a 19-count Superseding Indictment involving conspiracy and securities fraud crimes stemming from their alleged involvement in the largest hedge fund insider trading case in history. Rajaratnam was the Managing Member of Galleon Management, LLC ("Galleon"), and a portfolio manager for Galleon Technology Offshore, Ltd., and certain accounts of Galleon Diversified Fund, Ltd., and Chiesi was an employee of New Castle Partners ("New Castle"), formerly the equity hedge fund group of Bear Stearns Asset Management, Inc.
The government charges that Rajaratnam, Chiesi and others repeatedly traded on material, nonpublic information pertaining to upcoming earnings forecasts, mergers, acquisitions, or other business combinations ("Inside Information"). The Inside Information was given as tips by insiders and others at hedge funds, public companies, and firms. Today's Superseding Indictment charges trading in the following companies based on Inside Information: Intel Corporation ("Intel"); IBM; Akamai Technologies, Inc.; Polycom, Inc.; Hilton Hotels Corp.; Google Inc.; Sun Microsystems; Clearwire Corporation ("Clearwire"); Advanced Micro Devices ("AMD"); ATI Technologies Inc. ("ATI"); eBay Inc. ("eBay"); and PeopleSupport, Inc.
As a result of their insider trading, Rajaratnam, Chiesi, and others earned tens of millions of dollars of illegal profits for themselves and the hedge funds with which they were affiliated. As previously reported, Rajaratnam engaged in overlapping schemes with Ali Far and Roomy Khan—both of whom have pleaded guilty to insider trading charges and are cooperating with the Government—as well as Chiesi and other co-conspirators to trade on the basis of Inside Information in several publicly traded companies.
The Indictment seeks forfeiture of the proceeds of the charged crimes, specifically $49 million, which consists of $45 million in illegal profits and losses avoided by Galleon, and $4 million in illegal profits for New Castle.
Rajaratnam, 52, and Chiesi, 44, both reside in New York, New York.
The charges contained in the Indictment are merely accusations, and the defendants are presumed innocent unless and until proven guilty.
The case begs a question. If Rajaratnam and Chiesi are found guilty, should both political parties return the donations?
Records at Open Secrets show Raj Rajaratnam donated more than $80.000 to Democrats between 2006-2008.
Records show Danielle Chiesi gave approximately $5,000 to the National Republican Congressional Committee.
[*Source for legal information about justice proceedings from FBI news release 2-9-10. Beginning with paragraph 3, parts related to legalese are taken verbatim from that release.]