NEW YORK, Dec 16 (Reuters) - Indicted Galleon hedge fund founder Raj Rajaratnam and his lawyers should “listen to the tapes” of government wiretaps in a wide-ranging insider trading probe, a lawyer for government cooperator Roomy Khan said on Wednesday.
Rajaratnam, Chiesi indicted for insider trading
NEW YORK, Dec 15 (Reuters) - A U.S. grand jury on Tuesday indicted Galleon hedge fund founder Raj Rajaratnam and co-defendant Danielle Chiesi on charges of securities fraud and conspiracy in an insider trading case involving employees of some of America's best-known companies.
The indictment in Manhattan federal court, two months after the pair were charged along with others in a coast-to-coast probe on Oct. 16, lists 17 counts of conspiracy to commit securities fraud and securities fraud.
Sri Lankan-born Rajaratnam and Chiesi, who worked with New Castle LLC hedge fund, are the only indictments returned so far in the case, which expanded in November to include 20 people facing criminal and civil charges.
The billionaire Rajaratnam, a U.S. citizen who is free on $100 million bail, is the most prominent figure in what U.S. prosecutors described as the biggest hedge fund insider trading case ever.
His lawyer has consistently said he would fight the charges.
“Mr Rajaratnam is innocent and looks forward to his day in court when a jury of his fellow citizens will examine and evaluate all of the evidence,” Rajaratnam's lawyer, John Dowd, said in a statement after the indictment was returned.
A lawyer for Chiesi could not immediately be reached for comment.
Most of the accused had expertise in tech stocks, and the allegations included passing inside information on earnings announcements, takeovers and contracts on 10 companies, generating more than $30 million in illegal profits, according to prosecutors.
Six traders or lawyers have pleaded guilty to charges in the investigation, which ensnared employees of IBM Corp, McKinsey & Co management and former lawyers of the Ropes & Gray law firm.
Khan, a former Galleon hedge fund and Intel Corp employee who pleaded guilty at a closed court proceeding on Oct. 19, has been the focus of Rajaratnam lawyer John Dowd's arguments in denying charges in what prosecutors describe as the biggest hedge fund insider case ever.
Dowd has argued in court papers that much of the government's case relied on Khan, who was convicted of wire fraud in 2001. He said the government “found no evidence that Mr Rajaratnam traded on insider information allegedly provided by Ms Khan” from her cooperation in an earlier probe. Investigators used wire taps to gather evidence of alleged insider trading in big name companies such as Hilton Hotels and Google Inc, among others.
“I suggest Mr Dowd should listen to the tapes, then make the evaluation,” Khan's lawyer Stanislao German told reporters after his client appeared in Manhattan federal court on Wednesday. “She wants to be 100 percent truthful and she takes responsibility for what she has done.”
U.S. District Court Judge Richard Berman formally accepted the guilty plea and set a tentative sentencing date of May 17 for Khan, who is free on bail. She wore a tightly wrapped black coat during her brief appearance, answering “Yes, Sir” or “I understand” to the judge's questions. Khan is one of six traders or lawyers who have pleaded guilty and are cooperating. Rajaratnam, 52, is the most prominent defendant among 21 accused in an insider trading case involving employees of some of America's best-known companies, including IBM Corp, McKinsey & Co and Intel Capital, an arm of Intel Corp.
Sri Lankan-born Rajaratnam and Danielle Chiesi, a former employee of New Castle Funds LLC, are the only two defendants indicted so far.
The indictments returned on Tuesday formalize charges of securities fraud and conspiracy to commit securities fraud against the pair, who were arrested on Oct. 16. It was unclear why four others arrested and charged on the same day have not been indicted. They are Rajiv Goel, a former director at Intel Capital; Anil Kumar, former director of management consulting firm McKinsey and Company Inc; Mark Kurland, former executive at New Castle hedge fund; and Robert Moffat, former senior vice president and executive in IBM's systems and technology group.
Their lawyers did not return telephone calls. Lawyers for Rajaratnam and Chiesi said their clients would plead not guilty and fight the charges.
They are free on bail with a court date scheduled for Monday.
In the overall case, inside trading allegedly took place in shares of Google, Sun Microsystems, Advanced Micro Devices, Polycom, Hilton, Intel, Clearwire, Akamai, Athero Securities and IBM, among others.