The trial of Galleon Group LLC co-founder Raj Rajaratnam next month is the culmination of U.S. investigations dating back 12 years that involved blind alleys, anonymous tips, wiretaps and a trip into the LTTE underworld.
Rajaratnam, 53, stands accused by Manhattan U.S. Attorney Preet Bharara of leading an insider-trading conspiracy that earned his fund about $45 million. He has pleaded not guilty.
Testimony at a four-day hearing in October to consider the admissibility of wiretaps showed what evidence the U.S. is likely to rely on at trial, set for March 8, as well as much of the inside story of how investigators cracked the case.
The US Federal Bureau of Investigation said it considered placing an undercover agent inside the New York-based Galleon firm, before opting instead to tap his phones because it had no viable candidate. The case was woven from other threads, including a former Intel Corp. employee’s confessions; a 2006 regulatory probe of his brother Rengan, instant messages from Rajaratnam; and a March 2007 anonymous letter to the SEC. Bloomberg
The case was the first to make significant use of phone taps to gather evidence of trading on inside information, a technique more commonly used against organized crime figures. During a three-year probe, the FBI secretly recorded more than 2,400 conversations. U.S. District Judge Richard Holwell, who is presiding over the case, ruled those recordings admissible at trial.
Prosecutors said Rajaratnam used tips from hedge fund executives, corporate officials and other insiders to conduct illegal trades involving 12 companies, including Intel, International Business Machines Corp., Akamai Technologies Inc., Google Inc., Advanced Micro Devices Inc., EBay Inc., Polycom Inc. and Hilton Hotels Corp.
Rajaratnam founded Galleon in 1997 with three other colleagues from Needham & Co. as a hedge fund firm focusing on technology and health-care stocks. Galleon had as much as $7 billion in assets under management and was once among the 10 largest hedge funds in the world, reported Bloomberg.