Another Rajaratnam Named in Ring - Younger Brother of Galleon Founder Was Co-Conspirator, Prosecutors Allege; Pressure on Raj Builds
Prosecutors have alleged that a younger brother of Galleon Group founder Raj Rajaratnam was a co-conspirator in a criminal insider-trading ring, according to people familiar with the matter.
The latest development—which hasn't previously been made public—comes as the pressure builds on Raj Rajaratnam to plead guilty. The former hedge-fund titan is facing a criminal trial this month on 14 counts tied to insider-trading charges.
Prosecutors haven't disclosed any charges of wrongdoing against Ragakanthan Rajaratnam, 49, in the insider-trading investigation. Above, his borther, Galleon founder Raj Rajaratnam, leaves federal court last year.
In several other high-profile federal cases in the past decade, prosecutors have investigated relatives of major Wall Street defendants as they decided whether to plead guilty.
Raj Rajaratnam has denied the charges and said he will fight them in court. So far, 19 of 26 defendants in the Galleon case have pleaded guilty; several are cooperating with the U.S.
A representative for Raj Rajaratnam, 53 years old, declined to comment Tuesday, as did representatives for the Manhattan U.S. attorney's office and the Federal Bureau of Investigation.
The government's move emerged in recent days in court filings related to charges against former Galleon trader Michael Cardillo, who pleaded guilty last week in a New York federal court to securities fraud and conspiracy to commit securities fraud.
In filing charges against Mr. Cardillo, prosecutors cite a co-conspirator, or "CC-1," whom they allege participated in an insider-trading scheme with Messrs. Cardillo, Rajaratnam and others.
"CC-1" is Raj's brother, Ragakanthan Rajaratnam, a Clorox Co. vice president, according to people familiar with the matter; he worked at Galleon between 2006 and 2009 as a portfolio manager.
Prosecutors haven't disclosed any charges of wrongdoing against Ragakanthan Rajaratnam, 49, in the insider-trading investigation.
At Clorox, Ragakanthan Rajaratnam works in the marketing division, analyzing consumer trends to develop marketing programs and products, a Clorox spokeswoman said. She declined to comment further. Ragakanthan Rajaratnam didn't return calls for comment.
Known as "R.K." when he worked at Galleon, Ragakanthan Rajaratnam managed a portfolio of stocks, and his orders to buy and sell stocks were executed by Mr. Cardillo, 33, people familiar with the matter say. A lawyer for Mr. Cardillo declined to comment.
The charging document in the case against Mr. Cardillo alleges that Mr. Cardillo, Raj Rajaratnam and CC-1 executed transactions based on inside information in shares of J.M. Smucker Co. in advance of its acquisition of Folgers in June 2008 from Procter & Gamble Co. Prosecutors also alleged that Mr. Cardillo, CC-1 and Raj Rajaratnam traded on inside information in advance of earnings by P&G.
Representatives for Smucker couldn't immediately be reached for comment.
A P&G spokesman said the company is cooperating with the government's investigation and had been told it isn't a target or subject of the probe.
R.K., the middle of three brothers, graduated from Cornell University's Johnson Graduate School of Management in 1984 and worked at General Mills Inc., Kraft Foods Inc. and ConAgra Foods Inc. before moving to Galleon in 2006, according to public records.
There is a history of such tactics by the government. For instance, prosecutors investigated the daughter and the 80-year-old father of Samuel Waksal, the former chief executive of ImClone Systems Inc., after they sold ImClone stock based on information he gave them.
Mr. Waksal pleaded guilty in an insider-trading case in 2002, agreeing to cooperate but not against his relatives. His daughter Aliza and father, Jack, never were charged.
"The fate of a family member is a huge consideration for people who are confronting a criminal investigation—and the government knows that and takes advantage of it," said Mark Pomerantz, a lawyer who represented Mr. Waksal.
When former New York State comptroller Alan Hevesi pleaded guilty last year in a pension-fund investigation by then-Attorney General Andrew Cuomo, he negotiated an agreement in which prosecutors stipulated there was no evidence to charge his sons with any crimes.
Mr. Cuomo had examined whether one of Mr. Hevesi's sons had received assistance in running for a seat in the state Assembly and whether the other won business in connection with a kickback scheme at New York's pension fund.
Messrs. Hevesi and Cuomo declined to comment.
Mr. Rajaratnam's other brother, Rengan, 40, also drew the interest of investigators before the criminal probe of Galleon began. The case against Raj Rajaratnam and Galleon traces back to a 2007 civil insider-trading investigation involving Rengan Rajaratnam's hedge fund, Sedna Capital Management, by the Securities and Exchange Commission. The SEC declined to comment; Rengan Rajaratnam couldn't be reached.
Sedna closed in 2007, and Rengan Rajaratnam went to work at Galleon.
The SEC hasn't filed charges in the Sedna investigation, but the probe is continuing.
In recent weeks, a technology researcher under scrutiny in a large, unrelated insider-trading case, John Kinnucan, received an SEC subpoena related to the Sedna probe, requesting three years' worth of documents and records from him, according to a person familiar with the matter.
Mr. Kinnucan, who was visited by the FBI and has also received a criminal subpoena in connection to the unrelated case, hasn't been charged with any wrongdoing.
A lawyer for Mr. Kinnucan declined to comment. ( online.wsj.com )
Prosecutors have alleged that a younger brother of Galleon Group founder Raj Rajaratnam was a co-conspirator in a criminal insider-trading ring, according to people familiar with the matter.
The latest development—which hasn't previously been made public—comes as the pressure builds on Raj Rajaratnam to plead guilty. The former hedge-fund titan is facing a criminal trial this month on 14 counts tied to insider-trading charges.
Prosecutors haven't disclosed any charges of wrongdoing against Ragakanthan Rajaratnam, 49, in the insider-trading investigation. Above, his borther, Galleon founder Raj Rajaratnam, leaves federal court last year.
In several other high-profile federal cases in the past decade, prosecutors have investigated relatives of major Wall Street defendants as they decided whether to plead guilty.
Raj Rajaratnam has denied the charges and said he will fight them in court. So far, 19 of 26 defendants in the Galleon case have pleaded guilty; several are cooperating with the U.S.
A representative for Raj Rajaratnam, 53 years old, declined to comment Tuesday, as did representatives for the Manhattan U.S. attorney's office and the Federal Bureau of Investigation.
The government's move emerged in recent days in court filings related to charges against former Galleon trader Michael Cardillo, who pleaded guilty last week in a New York federal court to securities fraud and conspiracy to commit securities fraud.
In filing charges against Mr. Cardillo, prosecutors cite a co-conspirator, or "CC-1," whom they allege participated in an insider-trading scheme with Messrs. Cardillo, Rajaratnam and others.
"CC-1" is Raj's brother, Ragakanthan Rajaratnam, a Clorox Co. vice president, according to people familiar with the matter; he worked at Galleon between 2006 and 2009 as a portfolio manager.
Prosecutors haven't disclosed any charges of wrongdoing against Ragakanthan Rajaratnam, 49, in the insider-trading investigation.
At Clorox, Ragakanthan Rajaratnam works in the marketing division, analyzing consumer trends to develop marketing programs and products, a Clorox spokeswoman said. She declined to comment further. Ragakanthan Rajaratnam didn't return calls for comment.
Known as "R.K." when he worked at Galleon, Ragakanthan Rajaratnam managed a portfolio of stocks, and his orders to buy and sell stocks were executed by Mr. Cardillo, 33, people familiar with the matter say. A lawyer for Mr. Cardillo declined to comment.
The charging document in the case against Mr. Cardillo alleges that Mr. Cardillo, Raj Rajaratnam and CC-1 executed transactions based on inside information in shares of J.M. Smucker Co. in advance of its acquisition of Folgers in June 2008 from Procter & Gamble Co. Prosecutors also alleged that Mr. Cardillo, CC-1 and Raj Rajaratnam traded on inside information in advance of earnings by P&G.
Representatives for Smucker couldn't immediately be reached for comment.
A P&G spokesman said the company is cooperating with the government's investigation and had been told it isn't a target or subject of the probe.
R.K., the middle of three brothers, graduated from Cornell University's Johnson Graduate School of Management in 1984 and worked at General Mills Inc., Kraft Foods Inc. and ConAgra Foods Inc. before moving to Galleon in 2006, according to public records.
There is a history of such tactics by the government. For instance, prosecutors investigated the daughter and the 80-year-old father of Samuel Waksal, the former chief executive of ImClone Systems Inc., after they sold ImClone stock based on information he gave them.
Mr. Waksal pleaded guilty in an insider-trading case in 2002, agreeing to cooperate but not against his relatives. His daughter Aliza and father, Jack, never were charged.
"The fate of a family member is a huge consideration for people who are confronting a criminal investigation—and the government knows that and takes advantage of it," said Mark Pomerantz, a lawyer who represented Mr. Waksal.
When former New York State comptroller Alan Hevesi pleaded guilty last year in a pension-fund investigation by then-Attorney General Andrew Cuomo, he negotiated an agreement in which prosecutors stipulated there was no evidence to charge his sons with any crimes.
Mr. Cuomo had examined whether one of Mr. Hevesi's sons had received assistance in running for a seat in the state Assembly and whether the other won business in connection with a kickback scheme at New York's pension fund.
Messrs. Hevesi and Cuomo declined to comment.
Mr. Rajaratnam's other brother, Rengan, 40, also drew the interest of investigators before the criminal probe of Galleon began. The case against Raj Rajaratnam and Galleon traces back to a 2007 civil insider-trading investigation involving Rengan Rajaratnam's hedge fund, Sedna Capital Management, by the Securities and Exchange Commission. The SEC declined to comment; Rengan Rajaratnam couldn't be reached.
Sedna closed in 2007, and Rengan Rajaratnam went to work at Galleon.
The SEC hasn't filed charges in the Sedna investigation, but the probe is continuing.
In recent weeks, a technology researcher under scrutiny in a large, unrelated insider-trading case, John Kinnucan, received an SEC subpoena related to the Sedna probe, requesting three years' worth of documents and records from him, according to a person familiar with the matter.
Mr. Kinnucan, who was visited by the FBI and has also received a criminal subpoena in connection to the unrelated case, hasn't been charged with any wrongdoing.
A lawyer for Mr. Kinnucan declined to comment. ( online.wsj.com )
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