The jury in Raj Rajaratnam’s high-profile insider-trading trial convicted the Galleon Group founder on all 14 counts today, marking a major victory for the government’s largest battle against illegal trading since Rudy Giuliani took on Michael Milken in the 1980s.
The 53-year-old Rajaratnam faced five counts of conspiracy and nine counts of securities fraud for insider trading on stocks including Google and Goldman Sachs — and faces giving up his posh lifestyle, which includes a mansion in Greenwich, Conn., for up to 25 years in prison.
Under a lenient reading of the US sentencing guidelines, according to federal prosecutor Jonathan Streeter, who spoke after the verdict, Rajaratnam is facing 15½-to-19½ years in prison when sentenced on July 29 at noon.
“It was a traumatic situation,” said one juror outside the Lower Manhattan courthouse minutes after the verdict was read.
“All I can say is I hope God will protect him and his family as best as He can,” said Relesta James, juror No. 12, who is a customer service representative for the MTA, who had described himself during jury himself as an avid churchgoer and birdwatcher.
While prosecutors asked Judge Richard Holwell to revoke Rajaratnam’s bond and lock him up pending sentencing, citing the fact that under the 22 years the US has had an extradition treaty with Sri Lanka, no one has ever been returned to the US, Holwell turned them down.
The judge did order Rajaratnam, the founder of the Galleon Group family of hedge funds, to wear an ankle bracelet and be confined to his home. The billionaire has homes in Greenwich, Conn., and Miami Beach.
The eight women and four men members of the jury sat in the jury box for seven weeks before beginning deliberations on April 25.
It was a jarring day for the once high-flying hedge fund guru. He appeared sullen as he walked into the courtroom to hear the verdict after the jury took nearly three weeks to deliberate the charges. Not one person in the jury — made up of eight women and four men — looked at Rajaratnam as the jurors filed into the courtroom.
Rajaratnam’s lead defense lawyer, John Dowd, speaking outside the courthouse, said, “We are going to take an appeal.”
“The case started out with 37 stocks,” Dowd said. “It’s down to 14. The score is 23-14 in favor of the defense. We’ll see you in the Second Circuit [the US Second Circuit Court of Appeals].”
Moments earlier, Dowd told Holwell that his appeal would focus on the admissibility of the FBI wiretaps. US Attorney Preet Bharara has aggressively pushed for and successfully used for the first time wiretaps in Wall Street crimes. Holwell, in a lengthy opinion, approved their use in the trial.
Dowd appeared ready to attack that decision.
After Dowd’s brief remarks outside the Lower Manhattan Courthouse, with a silent Rajaratnam at his side, the two fought their way through a phalanx of TV cameras to a silver Mercedes and drove off. During the scrum, Rajaratnam, wearing a soft cast on his right foot following minor surgery last week, stumbled over an orange traffic cone amid a bit of pushing, shouting and shoving.
FBI agent BJ Kang, who played a key role in the case, said “of course” he’s happy about the verdict and “for justice.”
Rajaratnam, whose former high-flying hedge fund firm once managed a whopping $7 billion in assets, argued that he was innocent of the charges because the tips either weren’t material or he traded for other reasons.
The government, led by Bharara and the New York FBI, battled his assertions of innocence with dozens of wiretaps and three witnesses who said they shared illegal stock tips with the hedge fund manager.
The verdict marks an astounding victory for Bharara’s war on insider trading, and could dramatically change the way business in done on Wall Street.
Bharara has already threatened that wiretaps will become the norm when it comes to fighting insider trading, but the courtroom victory lends greater credence to his ability to continue with the controversial practice.
Rajaratnam is the biggest fish in Bharara’s net, which has so far resulted in dozens of arrests and 21 guilty pleas.
Rajaratnam was among the first to fight the charges following his arrest in late 2009. But one by one the five people he was arrested with, including former trader Danielle Chiesi, copped pleas, leaving Rajaratnam the last man standing.