Billionaire Convicted of Fraud - Consumer Justice Foundation

Billionaire Convicted of Fraud

Written by Faith Anderson on October 13, 2011
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The “Dark Side” of the Hedge Fund Business

According to the government, Rajaratnam gathered inside information about pending corporate deals and earnings announcements from an array of informants, including a senior partner at the consulting firm McKinsey & Co., a Goldman Sachs board member, and an employee at another hedge fund. This case revealed a long-suspected dark side of the hedge fund business. Calling him the “modern face of illegal insider trading,” prosecutors accused Rajaratnam of using a corrupt network of tipsters to illicitly gain about $64 million. The 11-year sentence was significantly lower than the range of roughly 19 to 24 years requested by the government.

To build its case against Rajaratnam, the government used methods traditionally associated with investigations of violent crimes such as drug dealing and mobsters, to expose financial professionals and insiders trafficking in secrets about pending mergers. Although the hedge fund billionaire did not testify at his trial, the prosecution made use of secretly-made recordings of Rajaratnam talking to his associates.

Insider Trading and White Collar Crimes

Rajaratnam, who is in his 50s, joins a list of high-profile, white-collar financial figures that have been sent to prison, including former Enron executive Jeffrey Skilling, former WorldCom executive Bernard Ebbers, and Ponzi scheme mastermind Bernard Madoff. According to the judge, Rajaratnam has advanced diabetes that is leading to kidney failure. Defense lawyers requested that their client be sent to Federal Medical Center in Butler, N.C., part of the federal prison complex where Madoff is serving 150 years for cheating investors. This insider trading case was the most prominent of its kind since Ivan Boesky was convicted a generation ago. According to Rajaratnam’s defense team, he will appeal his conviction.

Posted Under: United States
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