"The tapes show he didn't believe the rules applied to him. Cheating became part of his business model."
"He" is a microcosm of a financial system in which the currency of fraud drives out honest price discovery and displaces productive activity, and large institutions game the markets on a daily basis with near impunity, while the public underwrites their steady gains and occasional but spectacular losses.
Sentencing will be on July 29.
AP
Hedge fund founder convicted in inside-trade case
May 11, 2011
NEW YORK (AP) — A former Wall Street titan was convicted Wednesday of making a fortune by coaxing a crew of corporate tipsters to give him an illegal edge on blockbuster trades in technology and other stocks — what prosecutors called the largest insider trading case ever involving hedge funds.
Raj Rajaratnam was convicted of five conspiracy counts and nine securities fraud charges at the closely watched trial in federal court in Manhattan. The jury had deliberated since April 25, and at one point was forced to start over again when one juror dropped out due to illness.
Prosecutors had alleged the 53-year-old Rajaratnam made profits and avoided losses totaling more than $60 million from illegal tips. His Galleon Group funds, they said, became a multibillion-dollar success at the expense of ordinary stock investors who didn't have advance notice of the earnings of public companies and of mergers and acquisitions.
Rajaratnam will remain free on bail, though now with electronic monitoring, at least until his July 29 sentencing.
The verdict came after seven weeks of testimony showcasing wiretaps of Rajaratnam wheeling and dealing behind the scenes with corrupt executives and consultants. Some of the people on the other end of the line pleaded guilty and agreed to take the witness stand against the Sri Lanka-born defendant.
Authorities said the 45 tapes used in the case represented the most extensive use to date of wiretaps — common in organized crimes and drug cases — in a white-collar case.
The defense had fought hard in pretrial hearings to keep the avalanche of audio evidence out of the trial by arguing the FBI obtained it with a faulty warrant. Once a judge allowed them in, prosecutors put the recordings to maximum use by repeatedly playing them for jurors.
"You heard the defendant commit his crimes time and time again in his own words," Assistant U.S. Attorney Reed Brodsky said in closing arguments.
"The tapes show he didn't believe the rules applied to him," the prosecutor added. "Cheating became part of his business model."
In one July 29, 2008, call, Rajaratnam could be heard grilling former Goldman Sachs board member Rajat Gupta...."
