Legal News

Raj Rajaratnam: The Inside Story

By Nathan Koppel

Continuing on the Rajaratnam theme, we highly recommend the two-part series on Raj that ran yesterday and today in WSJ.

Rajaratnam has been indicted on multiple counts of conspiracy and securities fraud. He has pleaded not guilty and has said he is innocent of all charges. (Click here for prior LB coverage of the case.)

We can't do justice to all 6,500 words in the Journal series, but trust us that it's chock full of colorful details.

The first article focuses on how Rajaratnam used charm and doggedness to build a financial empire. Here are some highlights:

As a young analyst of the computer-chip industry, Rajaratnam would charm executives with stories of a Horatio Alger upbringing in Sri Lanka, where he said his family had to dodge bullets during the country's civil war;

As a rising star at the Needham & Co. investment bank in the early 1990s, he liked to test personal limits, including boasting how he could stomach any kind of hot sauce. Once, after dousing chicken wings in habanero sauce, he started to cough uncontrollably and had to leave work;

At Needham, Rajaratnam repeatedly scored detailed, advanced knowledge of company's expected earnings;

One company grew so frustrated at how Rajaratnam would hit up employees for market-moving information that it inserted language in employment contracts barring certain employees from talking to Rajaratnam;

After leaving Needham, to run the Galleon hedge fund, Rajaratnam took his fondness for pranks to a new level. He hired a dwarf to show up at one meeting and claim he was an analyst for "small cap" stocks; on another occasion, Rajaratnam offered $5,000 to any employee who agreed to be shocked by a stun gun. (One trader took him up on the offer);

He steadily built a prominent profile outside of the hedge fund world, donating huge sums to charities and hosting lavish parties, including a Kenny Rogers concert at his Greenwich, Conn. home and a 2007 Super Bowl party at a Florida mansion that he rented for $250,000.

Today's piece in the Journal looks at how the feds have tried to build their case against Rajaratnam by using cooperating witnesses and wiretaps to listen in on Rajaratnam's calls. We'll hopefully whet your appetite by quoting from the opening paragraphs:

Andrew Michaelson was buried in paper, millions of pages of it. A lawyer with the Securities and Exchange Commission in Manhattan, [he] had been burrowing through the documents since they were carted away from [Galleon Group's] headquarters months before. Galleon’s billionaire founder, Raj Rajaratnam, had handed them over voluntarily in early 2007 in cooperation with an SEC investigation of his younger brother, a probe that hasn’t resulted in charges. Instead, when Mr. Michaelson’s team found the needle in this haystack of documents — a single text message — it pointed them toward Raj Rajaratnam himself.

Full post as published by Law Blog - WSJ.com on December 30, 2009 (boomark / email).