Galleon’s Rajaratnam loses bid to cut insider trading sentence

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By Jonathan Stempel | NEW YORK

NEW YORK A federal judge on Friday rejected
Galleon Group hedge fund founder Raj Rajaratnam’s bid to void
much of his insider trading conviction and shorten his 11-year
prison sentence.

U.S. District Judge Loretta Preska in Manhattan said
Rajaratnam failed to show his actual innocence on five of the 14
counts on which he was convicted, or that two other counts
should be vacated because the main government witness committed

Preska also rejected Rajaratnam’s argument that his trial
counsel was ineffective, and denied Rajaratnam’s bid to reduce
the $53.8 million he agreed to forfeit to about $4.3 million.

Christine Chung, a lawyer for Rajaratnam, did not
immediately respond to requests for comment. U.S. Attorney Preet
Bharara in Manhattan declined to comment through a spokeswoman.

Rajaratnam is the highest-profile fund manager convicted in
Bharara’s crackdown on insider trading, which since 2009 has led
to more than 80 convictions and guilty pleas, including a guilty
plea from billionaire Steven A. Cohen’s SAC Capital Advisors LP.

Prosecutors said Rajaratnam made up to $63.8 million from
2003 to 2009 through insider trading in stocks such as eBay Inc
, Goldman Sachs Group Inc and Google Inc, now
called Alphabet Inc.

Rajaratnam, 59, was convicted in May 2011 on nine securities
fraud counts and five conspiracy counts. He has served 5-1/4
years in prison and is eligible for release in July 2021.

Former McKinsey & Co chief and Goldman director Rajat Gupta
is awaiting a federal appeals court decision on whether to
reverse his conviction for providing tips about Goldman.

In seeking a shorter sentence, Rajaratnam said he did not
provide benefits to insiders for confidential information
related to trades underlying five counts, or know that insiders
provided that information for the sake of any benefit.

But on Dec. 6, the U.S. Supreme Court ruled in a separate
case that gifts of confidential information could violate
securities laws even if recipients did not give tangible
benefits in return.

Preska wrote: “Here, because all the information was
transferred between trading relatives or friends, the mere
transfer of information is sufficient to constitute a benefit.”

Rajaratnam, moreover, “had knowledge that inside information
was being conferred in exchange for such benefit,” she added.

The judge also rejected Rajaratnam’s claim that former
McKinsey partner Anil Kumar perjured himself, citing alleged
contradictory testimony Kumar gave three years later at a trial
of Rajaratnam’s younger brother Rengan, who was acquitted.

Preska said the alleged contradictions were immaterial, and
that “a faulty memory resulting in inaccuracies or mistakes” did
not mean perjury occurred.

The cases are U.S. v. Rajaratnam, U.S. District Court,
Southern District of New York, No. 09-cr-01184; and Rajaratnam v
U.S. in the same court, No. 15-05325.

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