Besides Tamil-origin Raj Rajaratnam, the founder of Galleon Group, the two Indian Americans identified as Anil Kumar (51) and Rajiv Goel (51) were arrested in the $20 million hedge fund insider-trading case on Friday, said Preet Bharara, the US Attorney for the Southern District of New York.
While Rajaratnam is a resident of New York, Kumar and Goel live in California. The other three involved in this case, unveiled today, are Danielle Chiesi (43) from New York; Robert Moffat (53) from Connecticut and Mark Kurland (60) from New York.
If convicted all of them face imprisonment of up to 20 years, according to the indictment, which reads that the defendants "routinely received inside information directly or indirectly from insiders and provided it to each other for the purpose of trading based on the information", filed in the US court.
Noting that this should be a wakeup call for the Wall Street, Bharara -- an Indian American recently appointed to this powerful post by US President Barack Obama -- termed it as a decisive action against fraud on the Wall Street.
"It should be a wakeup call for every hedge fund manager and every Wall Street trader and every corporate executive who is even thinking about engaging in insider trading," Bharara said.
"As the defendants in this case have now learned the hard way, they may have been privy to a lot of confidential corporate information, but there was one secret they did not know: we were listening," he said.
"Today, tomorrow, next week, the week after, privileged Wall Street insiders who are considering breaking the law will have to ask themselves one important question: Is law enforcement listening?" Bharara said in a statement.
"Make no mistake -- the $20 million in illicit profits come at the expense of the average public investor," Joseph Demarest, Assistant Director-in-Charge of the New York Office, said.
"Where knowledgeable businessmen are unscrupulous and act without control, the result is unadulterated greed. The FBI's role in combating white collar crime is to ensure integrity in the marketplace, to protect the average investor, and by extension, the economy," he said.
According to the two complaints unsealed in Manhattan federal court, Rajaratnam, Kurland, Chiesi, and others repeatedly traded on material, non-public information given as tips by insiders and others at hedge funds, public companies, and investor relations firms -- including Intel, IBM, McKinsey, Moody's Investors Services Inc., Market Street Partners, Akamai Technologies, Inc. and Polycom Inc.
As a result of their insider trading, Rajaratnam, Chiesi, Kurland and others earned millions of dollars of illegal profits for themselves and the hedge funds with which they were affiliated.
One of the insiders, Kumar, profited from investments in Galleon. Goel, also an insider, received profitable trades in a personal account managed by Rajaratnam, the complaints said.
Telephone conversations between Rajaratnam and Chiesi, intercepted based on court-authorised wiretaps of phones, as well as consensually recorded conversations with an individual who subsequently became a cooperating government witness (the CW), revealed that Rajaratnam, Kurland, Chiesi and the CW routinely received inside information directly or indirectly from insiders and provided it to each other for the purpose of trading based on the information.
The material, non-public information pertained to upcoming earnings forecasts, mergers, acquisitions, or other business combinations (the Inside Information), said the statement issued by the Department of Justice. Galleon Group is a hedge fund with up to $7 billion in assets under management.
Out of the $20 million, Rajaratnam alone made $12.7 million in illegal profits for Galleon.
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