Rajat Gupta sentenced to 2 years in prison and a $5 million fine

Rajat Gupta, a former Goldman Sachs and Procter & Gamble director and the former head of McKinsey & Co.'s Chicago office, was sentenced to two years in prison today for leaking boardroom secrets to former hedge fund manager Raj Rajaratnam, the New York Times reports.

Mr. Gupta also was Miles White's mentor back when the Abbott CEO was a young consultant at McKinsey. Mr. Gupta also once served on the University of Chicago's board of trustees.

The New York Times reports that Mr. Gupta, 63, "is the most prominent figure to face prison in the government's sweeping crackdown on insider trading."

The Securities and Exchange Commission brought civil fraud charges against Mr. Gupta in March 2011. The SEC alleged that, at the height of the financial crisis, Mr. Gupta passed along privileged financial information that helped enrich Mr. Rajaratnam, a former billionaire hedge fund manager who was the prime target of the criminal probe.

Last week, Mr. White asked Judge Jed Rakoff of Federal District Court in Manhattan to go easy on Mr. Gupta. “Rajat's contributions to global welfare — in business, in philanthropy, in education, in civil society — have been rivaled by very few people," Mr. White wrote in a sentencing memo.

Raj Rajaratnam of Galleon Group gets 11 years for insider trading

Raj Rajaratnam, the founder of the Galleon Group family of hedge funds, was sentenced on Thursday to 11 years in prison for his role in a huge insider trading case.

That is the longest sentence ever handed out for insider trading. Previously, the record was ten years—held by another Galleon employee, Zvi Goffer, and Hafiz Muhammad Zubair Naseem, a former Credit Suisse banker sentenced in 2008.

Prosecutors had sought a sentence of up to more than 20 years in prison, while Rajaratnam's lawyers had asked for no more than 8 years.

Rajaratnam was convicted in May on several charges of insider trading and conspiracy.

Rajaratnam, who headed Galleon Management, was convicted in May on 14 counts of conspiracy and securities fraud for illegally using inside information to trade in stocks such as Goldman Sachs and Intel. The trading generated profits or avoided losses of $72 million, the government estimated.

The sentence was substantially less than the government sought. In an August court filing, the Justice Department proposed a prison sentence of 19 years and seven months to 24 years and five months. Such a term was warranted to “provide just and fair punishment for perhaps the worst insider trading offender (who has been caught to date) in history, and deter others,” the Justice Department wrote.

To build its case against Rajaratnam, the government used tactics traditionally associated with investigations of violent offenses, such as drug dealing and organized crime. Though Rajaratnam did not testify at his trial, the prosecution made extensive use of secretly made recordings of him talking to his associates.

According to the government, Rajaratnam gathered inside information about pending corporate deals and earnings announcements from an array of tipsters including a Goldman Sachs board member, a senior partner at the consulting firm McKinsey & Co., and an employee at another hedge fund.

Rajaratnam, who is in his 50s, will join a list of high-profile, white-collar financial figures sent to prison, including former Enron executive Jeffrey Skilling, former WorldCom executive Bernard Ebbers and Ponzi scheme mastermind Bernard Madoff.

The insider trading case was the most prominent of its kind since Ivan Boesky was convicted a generation ago.

McKinsey director paid $2.6m for role in Rajaratnam insider trading

Anil Kumar, a former director at management consultancy McKinsey & Co, has admitted to his involvement in the Galleon Group insider trading ring.

As part of his guilty plea, Kumar said that he had received $1.75 million by Galleon Group founder Raj Rajaratnam for inside information about clients of McKinsey.

Kumar added that he had received a total of around $2.6 million for his role in the scam.

He said he received payment for his services from the Galleon Group via a Swiss bank account – money he then invested in the hedge fund using an account in the name of one of his employees at home.

Kumar met Rajaratnam in the 1980s when the pair attended the Wharton School of Business at the University of Pennsylvania.

After admitting his guilt, Kumar offered an apology to his former colleagues.

"I understood Mr Rajaratnam was going to trade securities. I understood that my conduct was unlawful," he said.

"To all my colleagues whose trust I have betrayed, I am sorry."

The insider trading relating to Kumar's case centered around the acquisition of ATI Technologies by Advanced Micro Devices (AMD).

Kumar's claims have been denied by lawyers for Rajaratnam, who insist no such payments were made.

John Dowd, Rajaratnam's lawyer, said that Galleon Group's making of investments based on a potential merger did not mean it had insider knowledge of the deal.

"An analyst's prediction that AMD would acquire ATI was widely reported in the press more than seven weeks before the acquisition was announced," he stated.

In November last year, Hector Ruiz, the chairman of AMD, resigned from his role at the company after it was alleged in widespread newspaper reports that he had also passed on secret information about the company to the insider trading ring.

However, no charges have been bought against Mr Ruiz by US prosecutors.

Raj Rajaratnam made at least $36 million from insider trading

Raj Rajaratnam, the founder of Galleon Group, made "at least" $36 million in profits from his insider trading ring, US prosecutors have claimed.

This is double the $17 million amount initially alleged when Mr Rajaratnam was first arrested in October last year.

He is said to have made the money through stock trades that were aided by inside information by hedge fund and company executives.

The claim was made in a court filing opposing an application made by Mr Rajaratnam for a reduction in his $100 million bail, reports Bloomberg.

A total of 21 people have been arrested in connection with two overlapping insider trading rings, with six pleading guilty so far.

Mr Rajaratnam is due to appear in court on Friday (January 8th 2010) in relation to the bail plea.

Last month, Mr Rajaratnam and co-defendant Danielle Chiesi both entered not guilty pleas on the charges against them.

Raj Rajaratnam of Galleon Group, ex-Bear Sterns directors, others charged in insider trading

In a case echoing the scandals of the 1980s, federal authorities exposed what they claim is the biggest insider-trading ring in a generation -- a conspiracy in which a hedge-fund kingpin and executives at blue-chip firms including IBM and Intel allegedly connived to profit on Google and other big-name stocks.

At the center was Raj Rajaratnam, founder of Galleon Group, a New York-based fund firm that manages $3.7 billion. A native of Sri Lanka, he spent years carving a reputation as a meticulous investor in technology stocks, building a fortune estimated at $1.5 billion.

Rajaratnam, 52, faces 13 fraud and conspiracy counts, many of which carry 20-year maximum sentences. Under federal sentencing guidelines, he faces 10 years in prison if convicted at trial, Assistant U.S. Attorney Josh Klein said in court yesterday. Galleon Partners, based in Manhattan, has offices in London, Singapore, Mumbai, and Menlo Park, California.

$20 Million Scheme

Also arrested in the alleged $20 million scheme were Rajiv Goel, who worked at Intel Capital as a director in strategic investments, Anil Kumar, who worked as a director at McKinsey & Co., and IBM Corp. executive Robert Moffat. The former officials at Bear Stearns Asset Management are Danielle Chiesi and Mark Kurland, who were affiliated with the firm’s New Castle Partners, which managed about $1 billion. Prosecutors called it the biggest insider trading case involving hedge funds.

“The defendants operated in a world of, you scratch my back, I’ll scratch your back,” Bharara said at a press conference yesterday. “Greed, sometimes, is not good.”

He said the prosecution is the first time wiretaps have been used to target insider trading, calling the case “unprecedented.”

Galleon, which started as a hedge fund firm focusing on technology and health-care stocks, grew to more than $5 billion in 2001 from its start in January 1997. Rajaratnam founded Galleon with three other colleagues from Needham & Co., an investment bank that focused on technology and health-care companies.

Oversaw $2.6 Billion

Galleon Management, the company’s advisory business, oversaw more than $2.6 billion at the end of March, mostly on behalf of hedge funds, according to regulatory filings it submitted to the U.S. Securities and Exchange Commission at the time. Rajaratnam held a 50 percent to 75 percent controlling stake, according to the documents.

#559 on Forbes World's Billionaires list

http://www.forbes.com/lists/2009/10/billionaires-2009-richest-people_Raj-Rajaratnam_RUQ2.html

Net Worth:$1.3 bil
Fortune:self made
Source:hedge funds
Age:51
Country Of Citizenship:United States
Residence:New York, New York
Industry:Finance
Education:University of Sussex, Bachelor of Arts / Science, University of Pennsylvania Wharton School, Master of Business Administratio
Marital Status:married, 3 children

Hedge fund guru's tech focus helped shore up his returns: flagship fund down 17% in 2008. Father ran Asian operations for singer Sewing Co. Sri Lanka native studied engineering at U. of Sussex in England, then M.B.A. at Wharton 1983. Early career at investment banking boutique Needham & Co. Became president in 1991. Founded hedge fund Galleon Group 6 years later; making big bets on health care, technology companies. Annual returns: 22% net of fees since inception. Today firm is believed to manage $6 billion across 6 funds.