Rajaratnam’s Comments ‘Inaccurate’: U.S.

By Patricia Hurtado - Oct 25, 2011 6:42 AM GMT+0700
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Raj Rajaratnam, co-founder of Galleon Group LLC, right, exits federal court with his attorney Terence Lynam in New York, on Oct. 13, 2011. Photographer: Peter Foley/Bloomberg

Raj Rajaratnam, the Galleon Group LLC hedge fund manager sentenced to 11 years in prison for masterminding an insider-trading scheme, made inaccurate statements about the federal investigation in an interview published in Newsweek magazine, U.S. officials said.

“A number of his assertions are inaccurate,” said Ellen Davis, a spokeswoman for Manhattan U.S. Attorney Preet Bharara, whose office along with the FBI prosecuted a nationwide investigation of insider trading at hedge funds, technology companies, banks and consulting firms. More than 50 people have pleaded guilty or been convicted at trials following a multiyear probe by FBI agents across the country.

Jim Margolin, a spokesman for the Federal Bureau of Investigation in New York, said in an interview that comments Rajaratnam attributed to FBI agents “were never uttered.”

Rajaratnam was interviewed by Suketu Mehta, who on his website describes himself as a fiction writer and an associate professor of journalism at New York University. Rajaratnam said prosecutors pushed him to plead guilty to one criminal charge and become an informant against former Goldman Sachs Group Inc. director Rajat Gupta, according to the article.

Rajaratnam understood that he would be sentenced to as little as five years in prison, the article said.

Prosecutors urged him to turn on Gupta as late as two weeks before he was sentenced Oct. 13 by U.S. District Judge Richard Holwell, Rajaratnam reportedly said.

Plea Bargain

“They wanted me to plea-bargain,” Rajaratnam was quoted as saying. “They want to get Rajat. I am not going to do what people did to me. Rajat has four daughters.”

Prosecutors called Gupta and Rengan Rajaratnam, Raj’s brother, unindicted co-conspirators. Neither has been charged.

Mehta didn’t respond to an e-mail seeking comment on the statements by the FBI and Bharara’s office.

FBI agent B.J. Kang, the lead investigator on the case, told Rajaratnam, “Take a good look at your son. You’re not going to see him for a long time,” and added, “Your wife doesn’t seem so upset. Because she’s going to spend all your money,” according to the article.

Agents later “thumped tables, jumped up and down, told him, ‘Just say you did it to one count!’” Mehta wrote.

In the interview, Rajaratnam said prosecutors attempted to “get inside his head,” and added, “I’m a fighter, an underdog.”

Margolin said that statements attributed to Kang and other agents were never spoken.

Kumar, Tips

Rajaratnam claimed that he trusted Kumar not to pass any tips that were illegal, saying, “I did not think a senior partner of McKinsey would violate the confidentiality of McKinsey. I assumed he was kosher, that he would not cross the line,” according to the article.

The U.S. Securities and Exchange Commission filed a civil administrative action March 1 alleging that Gupta passed inside information to Rajaratnam about Goldman Sachs and Procter & Gamble Co., where Gupta was on the board. The SEC dropped the case in August.

The U.S. obtained the guilty pleas and cooperation of four people who admitted being part of Rajaratnam’s insider-trading schemes. They included Anil Kumar, a former partner at McKinsey & Co.; Rajiv Goel, a former managing director at Intel Corp; Roomy Khan, a former trader; and Adam Smith, a former Galleon portfolio manager. Kumar, Goel and Smith testified against Rajaratnam.

Mehta wrote that the government had two kinds of cooperators in the case.

White Defendants

“The white defendants all pleaded without cooperating,” Mehta wrote, citing Rajaratnam. “They did not wear a wire.”

Rajaratnam was quoted as saying, “The South Asians all did the plea bargain with fingering,” and, “The Americans stood their ground. Every bloody Indian cooperated -- Goel, Khan, Kumar.”

Smith testified that he recorded telephone calls with Ian Horowitz, a former Galleon trader. Evidence showed that Khan made consensually recorded calls with Rajaratnam for the FBI after she began cooperating with the government.

Rajaratnam was quoted as saying that so many Indians were named in the indictment “because Roomy Khan was Indian.” He doesn’t believe there was a conspiracy to target South Asians, he reportedly told the magazine.

Brother’s View

In the article, Mehta quotes Rajaratnam’s brother Rengan, whose own fund, Sedna Capital Management LLC, was the subject of an SEC probe, as believing there was some effort by the government to target South Asians.

“For years these guys were sitting around in sports clubs and exchanging information,” Mehta quotes Rengan Rajaratnam as saying. “That wasn’t a crime. And now we immigrants do the same thing and it is?”

Rajaratnam said visits to Goel’s home in California weren’t made to obtain inside information, attributing visits to Goel’s wife’s cooking, according to the article.

“His wife makes really good chaat,” an Indian snack, Rajaratnam said.

Rajaratnam said that while no one in his family attended his trial, Bharara’s wife was frequently in attendance. A person with knowledge said that Bharara’s wife never attended the insider-trading trial.

Previous Accusations

Today wasn’t the first time U.S. officials called Rajaratnam untruthful. Assistant U.S. attorneys Jonathan Streeter, Reed Brodsky and Andrew Michaelson, who prosecuted the case, argued in court papers before sentencing that he obstructed justice by lying to the SEC when asked if he had committed insider trading.

Terence Lynam, a lawyer for Rajaratnam, didn’t reply to a voice-mail message seeking comment.

The fund manager attributed his decision to fight the charges to the advice of a Sri Lankan astrologist, according to the magazine article.

The astrologist said that “eventually I would prevail,” Rajaratnam was quoted as saying.

The case is U.S. v. Rajaratnam, 1:09-cr-01184, U.S. District Court, Southern District of New York (Manhattan).

To contact the reporter on this story: Patricia Hurtado in New York at pathurtado@bloomberg.net.

To contact the editor responsible for this story: Michael Hytha at mhytha@bloomberg.net.