Legal News

Guilty Plea in Galleon Case Turns Up Heat On Rajaratnam

By Amir Efrati

Raj Rajaratnam, the founder of hedge fund firm Galleon Group and a high-profile defendant in “the largest hedge fund insider-trading case in history,” just got a dose of bad news.

Thursday afternoon, Anil Kumar (pictured), a former McKinsey & Co. partner, stood before a federal judge in Manhattan and pleaded guilty to criminal fraud charges stemming from his involvement in the insider-trading ring. The upshot: Kumar is now a cooperating witness in the case, and it looks like he’ll testify against Rajaratnam. (Click here andhere for prior LB and WSJ coverage of Kumar, respectively.)

Kumar, who met Rajaratnam while they were in business school in the 1980s, admitted today to conspiring with Rajaratnam to engage in insider trading from 2003 through 2009. Kumar got insider information from his work at McKinsey and gave it to Rajaratnam in exchange for amounts ranging up to $1 million in certain years, according to a press release by the U.S. attorney’s office in Manhattan. The information provided by Kumar netted Galleon at least $19.7 million in profits.

In his role as a director at McKinsey, Kumar, 51 years old, advised clients in the technology industry and said he gave tips to Rajaratnam about Advanced Micro Devices and eBay.

Kumar’s sentencing is set for March 26 by Denny Chin, the same judge who last year sentenced Ponzi schemer Bernie Madoff to 150 years in prison. Kumar faces a maximum of 25 years in prison. At some point in the near future, the prosecutors in the case, Josh Klein and Jonathan Streeter, will tell Chin how much prison time they believe Kumar should receive.

Photo: Reuters

Full post as published by Law Blog - WSJ.com on January 07, 2010 (boomark / email).