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The United States Attorney for the Southern District of New York (Manhattan), announced on Tuesday that that the Sri Lankan born billionaire hedge fund manager Raj Rajaratnam and Danielle Chiesi, were charged with a seventeen count indictment involving conspiracy and securities fraud crimes stemming from their alleged involvement in the largest hedge fund insider trading case in history.
Rajaratnam was the Managing Member of Galleon Management and Chiesi was an employee of New Castle Funds, formerly the equity hedge fund group of Bear Stearns Asset Management - - a unit of the collapsed investment bank.
The indictment claims that Rajaratnam, Chiesi and others repeatedly traded on material, nonpublic information pertaining to upcoming earnings forecasts, mergers, acquisitions, or other business combinations . Inside information was given as tips by insiders and others at hedge funds, public companies, and firms -- including Intel, IBM, McKinsey & Company, Akamai Technologies and Polycom. As a result of their insider trading, they earned millions of dollars of illegal profits for themselves and the hedge funds with which they were affiliated. Rajaratnam engaged in overlapping schemes with Ali Far and Roomy Khan -- both of whom have pleaded guilty to insider trading charges and are cooperating with the government -- as well as Chiesi and other co-conspirators to trade on the basis of inside information in several publicly traded companies. Specifically, these individuals engaged in insider trading in Polycom, Hilton Hotels Corp. Google Inc., Clearwire Corporation, Akamai, Advanced Micro Devices and PeopleSupport.
“Mr. Rajaratnam is innocent and looks forward to his day in court when a jury of his fellow citizens will examine and evaluate all of the evidence,”his lawyer, John Dowd, said in a statement.
“We intend to plead not guilty and defend the case and hopefully at the end prove the client’s innocence,” Chiesi’s lawyer, Alan Kaufman, said in an interview.
Far and Khan are among a total of six people who have pleaded guilty and are cooperating with prosecutors. Others in the alleged insider- trading conspiracy aren’t named in the indictment.
Khan, a former employee at Intel and at Raj Rajaratnam's Galleon hedge fund, is viewed as a key witness
The New York Times reported last October: "She taped conversations with him and told prosecutors that she had provided inside information about Google and other stocks. She has agreed to plead guilty to conspiracy and securities fraud and is working with law enforcement in hopes of receiving a lighter sentence, according to the criminal complaint.
Ms. Khan, who was identified by people close to the case, has a legal past that may present a hurdle for federal prosecutors. In a lawsuit settled last month, a housekeeper for Ms. Khan and her husband, Sakhawat, said they had violated minimum wage laws by paying her about $250 a week for 80 to 90 hours of work. The lawsuit was settled after a judge said the Khans had fabricated evidence."
Several defendants denied wrongdoing last Wednesday in a civil lawsuit brought by the US Securities & Exchange Commission.
In response to the SEC's complaint, Robert Moffat, a former senior vice president at IBM, denied he provided material, nonpublic information to Danielle Chiesi.
Moffat "denies that he provided material nonpublic information to Chiesi concerning IBM's quarterly financial results," his lawyers wrote.
The SEC claims that Moffat provided material nonpublic information to Chiesi about Sun Microsystems's second-quarter 2009 earnings and IBM's fiscal quarter ending in December 2008. The SEC has alleged that Chiesi traded on that information.
The SEC also claims that Moffat and an unnamed executive at chip maker Advanced Micro Devices (AMD) tipped off Chiesi about AMD's pending transactions with two Abu Dhabi sovereign funds and that she passed the information to others.
In separate filings, Anil Kumar, a former McKinsey senior partner, and Rajiv Goel, an executive in Intel's treasury department, asserted their right not to be witnesses against themselves. Kumar and Goel also have been charged in the criminal case.
A federal grand jury indicted Galleon co-founder Raj Rajaratnam: