NEW YORK, (Reuters) – Hedge fund founder Raj Rajaratnam was found guilty on all 14 counts of insider trading in a sweeping victory for the government and a vindication of its aggressive use of phone taps to pursue Wall Street crimes.
Rajaratnam, at the center of the biggest insider trading investigation in decades, sat expressionless as the judge’s deputy read the jury’s verdict in a hushed New York courtroom. The Galleon Group founder could face at least 15 years in prison when he is sentenced on July 29.
The prosecution based its case on evidence that Rajaratnam ran a web of highly-placed insiders to leak valuable corporate secrets between 2003 and March 2009, earning an illicit $63.8 million from trading on the information.
The government’s unprecedented use of extensive phone tapping in an insider trading case, which is more often deployed in organized crime and drug trafficking probes, may have marked a turning point in the prosecution of white collar crimes.
“It’s an historic verdict,” said Bill Singer, securities lawyer with Gusrae, Kaplan, Bruno & Nusbaum.
“It will likely set the stage for a dramatic change not only in the way that the Wall Street insider-trader activities are investigated and prosecuted, but most likely this will have a chilling effect on individuals and companies that trade.”
Over the course of the two-month trial, the voices of Rajaratnam and his friends and business associates rumbled over courtroom loudspeakers in 46 digital audio recordings at the heart of the government’s case. The conversations were occasionally laced with profanity.
In these calls and from trial testimony, the jury learned how Rajaratnam worked his mobile phone even when he was on holiday on a beach in Miami or in Europe, making arrangements to deposit money into accounts for friends who had provided him tips.
The tipsters included executives at major blue chip companies such as Intel Corp, and Rajat Gupta, who was once head of elite management consultancy McKinsey & Co and a former Goldman Sachs Group Inc board member.
Gupta’s involvement as an unindicted co-conspirator prompted the government to make the unusual move of calling Lloyd Blankfein, the investment bank’s chief executive, to testify at the trial. In a fleeting moment during a break in his testimony, Blankfein shook Rajaratnam’s hand.
