By Edvard Pettersson and Patricia Hurtado - Apr 27, 2012 4:55 AM GMT+0700
Goldman Sachs Group Inc. (GS) banker Matthew Korenberg in California is under investigation for insider-trading related to Galleon Group LLC co-founder Raj Rajaratnam, a person familiar with the matter said.
Federal prosecutors in Los Angeles are investigating Korenberg, a banker at Goldman Sachs’s San Francisco office, and Paul Yook, a former Galleon employee, for insider-trading involving transactions in the health-care industry, said the person, who didn’t want to be identified because the investigation isn’t public.
Raj Rajaratnam, co-founder of Galleon Group LLC, right, exits federal court followed by his attorney Terence Lynam in New York. Photographer: Peter Foley/Bloomberg
Goldman Sachs has been aware of the allegations for more than two years and conducted its own investigation, said Michael DuVally, a spokesman for the New York-based bank, in an e-mail. Korenberg “remains actively employed,” DuVally said.
“There was an investigation of insider trading but it had nothing to do with Raj Rajaratnam,” John Hueston, a lawyer for Korenberg, said in a phone interview. “That’s very significant. He is still at Goldman Sachs and he has done nothing wrong and Goldman Sachs has stood behind him and continues to stand behind him.”
Federal prosecutors in New York this month disclosed that a Goldman Sachs employee was under investigation for passing illegal tips to Rajaratnam. It was at least the third person at the bank to be tied to a probe related to Rajaratnam and former Goldman Sachs director Rajat Gupta. The existence of the California investigation was disclosed in court proceedings involving Gupta’s prosecution for allegedly passing tips to Rajaratnam.
Gupta Trial
Gupta has pleaded not guilty and faces trial next month in Manhattan federal court.
Korenberg didn’t work on any of the deals involved in the Gupta case and has never been investigated for passing alleged tips to Gupta or Rajaratnam, Hueston said.
“These are entirely false allegations,” Hueston said.
“The multiyear investigation that he has been involved with has resulted in nothing,” Hueston said. “He has never tipped any information, he was never alleged to have tipped any inside information. He has had a distinguished career at Goldman Sachs.”
Hueston declined to comment on the nature of the investigation involving Korenberg.
‘Found Nothing’
“I’m not going to elevate the insignificance of that investigation that’s gone on now for more than 2 1/2 years and has found nothing,” he said.
Korenberg’s identity was reported earlier by the New York Times.
Yook didn’t immediately return a call to a number listed under his name in New York. Laura Eimiller, a spokeswoman for the Federal Bureau of Investigation in Los Angeles, declined to comment on the investigation. Gary Naftalis, a lawyer for Gupta, declined to comment on Korenberg.
On April 20, the U.S. notified U.S. District Court Judge Jed Rakoff, who is presiding over Gupta’s case in Manhattan, that an unidentified Goldman Sachs employee was under investigation for leaking inside information to Rajaratnam.
Unidentified Tipper
The unidentified tipper “allegedly gave material, nonpublic information to Mr. Raj Rajaratnam,” Naftalis said at the hearing. “We obviously would request of the government to get us any and all information relating to this additional sources that Mr. Raj Rajaratnam had at Goldman Sachs of nonpublic information as soon as possible.”
Yook and Rajaratnam’s brother Rengan were partners at Sedna Capital Management LLC. They were investigated by the U.S. Securities and Exchange Commission for insider trading in 2006, according to testimony at a pretrial hearing in Raj Rajaratnam’s case in October 2010 by Lindi Beaudreault, a lawyer who represented Galleon and Sedna. Yook was also questioned under oath by regulators as part of an investigation by the SEC into Sedna and Galleon, Beaudreault testified.
“At any time during Mr. Yook’s deposition, did he admit to engaging in insider trading?” Assistant U.S. Attorney Jonathan Streeter asked Beaudreault.
“I am sure he didn’t,” Beaudreault said.
“At any time during his deposition did he describe any suspicion that he had of insider trading?” Streeter asked.
“I don’t really remember about his deposition,” she said.
Since 2009, insider-trading and securities fraud charges have been filed against at least 64 people in the U.S. investigation. At least 59 people have either pleaded guilty or been convicted at trial. They include Rajaratnam, who is serving an 11-year prison term.
Goldman Sachs named Korenberg on a list of 272 managing directors in November 2009.
A woman carrying a white dog at Korenberg’s brown, two- story home in the Pacific Heights neighborhood of San Francisco, said “Sorry” and closed the door when asked for comment about the investigation. Korenberg bought the 2,640-square-foot, four- bedroom home built in 1900, for $2.6 million in 2010, according to real-estate website blockShopper.com.
To contact the reporters on this story: Edvard Pettersson in Los Angeles at epettersson@bloomberg.net; Patricia Hurtado in New York federal court at pathurtado@bloomberg.net.
To contact the editor responsible for this story: Michael Hytha at mhytha@bloomberg.net
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