Every weekday at 8:35 a.m., Galleon Group's 70 analysts, portfolio managers and traders pack into a conference room on the 34th floor of the IBM Building, a gray- green polished granite skyscraper on New York's Madison Avenue. Tardy arrivals are fined $25. At the head of the table, Chief Executive Officer Raj Rajaratnam fires off questions to the staff of his $3.7 billion hedge fund firm: Which companies' margins are peaking? What would change your mind about this stock? What's the risk of that company failing to win an expected contract? The 52-year-old billionaire expects his analysts to have an edge: better information than anyone else, say people who have attended the meetings. U.S. prosecutors allege that Rajaratnam's own edge was illegal. He was arrested on Oct. 16 at his home on Manhattan's Sutton Place, charged with using inside information to trade shares including Google Inc., Polycom Inc., Hilton Hotels Corp. and Advanced Micro Devices Inc., according to complaints. Five other defendants also were arrested in New York and California in a $20 million scheme that prosecutors say is the largest-ever insider trading case involving hedge funds. "Every trader wants an edge, and there are many gray areas when it comes to aggressive research," said Ron Geffner, a lawyer at New York-based Sadis & Goldberg LLP, whose clients include hedge funds. "But if you trade on material, non-public information that comes from a company insider who is breaching his fiduciary duty, odds are that it is illegal."
At the head of the table, Chief Executive Officer Raj Rajaratnam fires off questions to the staff of his $3.7 billion hedge fund firm: Which companies' margins are peaking? What would change your mind about this stock? What's the risk of that company failing to win an expected contract? The 52-year-old billionaire expects his analysts to have an edge: better information than anyone else, say people who have attended the meetings.
U.S. prosecutors allege that Rajaratnam's own edge was illegal. He was arrested on Oct. 16 at his home on Manhattan's Sutton Place, charged with using inside information to trade shares including Google Inc., Polycom Inc., Hilton Hotels Corp. and Advanced Micro Devices Inc., according to complaints. Five other defendants also were arrested in New York and California in a $20 million scheme that prosecutors say is the largest-ever insider trading case involving hedge funds.
"Every trader wants an edge, and there are many gray areas when it comes to aggressive research," said Ron Geffner, a lawyer at New York-based Sadis & Goldberg LLP, whose clients include hedge funds. "But if you trade on material, non-public information that comes from a company insider who is breaching his fiduciary duty, odds are that it is illegal."
Oct. 19 (Bloomberg) -- Federal investigators plan to charge at least 10 securities professionals with insider trading, some linked to the criminal case against billionaire hedge-fund manager Raj Rajaratnam that shook Wall Street last week, people familiar with the matter said. The pending crackdown, more than two years in the making and among the biggest undercover operations into insider trading, may yield charges against hedge-fund managers and their associates as early as this week, the people said, declining to be identified because the cases aren't public. Authorities had planned to arrest Rajaratnam this week as part of a broader sweep, expediting it after learning he had bought a plane ticket to travel to London on Oct. 16, one person said. The case against Rajaratnam, built on recorded conversations within a web of alleged conspirators, offers a glimpse of how U.S. investigators are using more aggressive tactics to identify illegal trades hidden within a blizzard of hedge-fund investments. Additional probes stem from a secret Securities and Exchange Commission data-mining project set up to pinpoint clusters of people who make similar well-timed stock investments. Some probes, like the one against Rajaratnam, rely on wiretaps. "If you're going to shoot the king, you better shoot to kill," said Bradley Bennett, a law partner at Baker Botts LLP in Washington who formerly focused on insider-trading cases as an SEC investigator. "If they're going to take on a billionaire, they need to have the strongest possible cases. The defendant's own words are the strongest possible evidence."
The pending crackdown, more than two years in the making and among the biggest undercover operations into insider trading, may yield charges against hedge-fund managers and their associates as early as this week, the people said, declining to be identified because the cases aren't public. Authorities had planned to arrest Rajaratnam this week as part of a broader sweep, expediting it after learning he had bought a plane ticket to travel to London on Oct. 16, one person said.
The case against Rajaratnam, built on recorded conversations within a web of alleged conspirators, offers a glimpse of how U.S. investigators are using more aggressive tactics to identify illegal trades hidden within a blizzard of hedge-fund investments. Additional probes stem from a secret Securities and Exchange Commission data-mining project set up to pinpoint clusters of people who make similar well-timed stock investments. Some probes, like the one against Rajaratnam, rely on wiretaps.
"If you're going to shoot the king, you better shoot to kill," said Bradley Bennett, a law partner at Baker Botts LLP in Washington who formerly focused on insider-trading cases as an SEC investigator. "If they're going to take on a billionaire, they need to have the strongest possible cases. The defendant's own words are the strongest possible evidence."
