Legal News

With New Allegations, Hot Rajaratnam Case Gets Even Hotter

By Ashby Jones

It’s not every day that federal prosecutors announce new and potentially damning charges in a motion concerning bail (often they’ll file a superseding indictment).

But federal prosecutors in Manhattan on Tuesday mixed up the formula a bit in their case against Galleon Group founder Raj Rajaratnam, alleging for the first time in this brief opposing Rajaratnam’s request to reduce his bail that Rajaratnam paid a tipster for inside information. Click here for the WSJ story; here for the NYT story; here for previous LB coverage of the Rajaratnam case. Details on the allegations will likely get fleshed out in a new indictment, however.

The filing — the first of the New Year in the sprawling Rajaratnam case — allege that Rajaratnam made the payment in 2006 to an unidentified source for a tip about an acquisition of ATI Technologies Inc. by Advanced Micro Devices Inc., reaping $19 million in illicit profit. Previous charges alleged Rajaratnam exchanged inside data with other sources and recipients of tips, but didn’t assert that he paid for information.

Rajaratnam was indicted Dec. 15 on charges of insider trading and has pleaded not guilty.
Akin Gump’s John Dowd, Rajaratnam’s lawyer, denied that his client paid a source for information on the ATI deal. He said information about an acquisition of ATI by AMD was public before the announcement in July. “An analyst’s prediction that AMD would acquire ATI was widely reported in the press more than seven weeks before the acquisition was announced,” Dowd said.

The $19 million in profit the U.S. alleges Rajaratnam made on the ATI tip eclipses the total of $17 million he allegedly reaped from the previous insider tips.

Tuesday’s court filing, related to a motion by Mr. Rajaratnam’s lawyers to reduce his $100 million bail, says Mr. Rajaratnam bought shares of ATI securities for the Galleon Technology Funds in advance of the acquisition, which was announced in July 2006. The payment was to a source to whom Mr. Rajaratnam had begun making “large payments in exchange for inside information in or about 2004,” the U.S. said.

Full post as published by Law Blog - WSJ.com on January 06, 2010 (boomark / email).