Raj Rajaratnam, the Galleon Group LLC co-founder convicted last year of insider trading, was ordered to give a deposition from federal prison in a tax-shelter lawsuit, according to a court filing.
New York state Supreme Justice Eileen Bransten at a March 13 hearing in Manhattan ordered Rajaratnam to answer questions at the Federal Medical Center Devens in Ayers, Massachusetts, where he began serving an 11-year sentence in December, according to a transcript of the hearing filed yesterday. Rajaratnam isn’t a defendant in the lawsuit.
Diversified Group, a tax-shelter promoter, asked Bransten on Feb. 15 to allow them to depose the former hedge-fund manager as part of the 2010 lawsuit. Samidh Guha, a lawyer for Rajaratnam, opposed the request, saying his client, who is appealing his conviction, would invoke his right against self- incrimination under the U.S. Constitution’s Fifth Amendment.
“The objection that the non-party may indeed assert the Fifth Amendment privilege is not appropriately made by counsel, but is only properly done once a question has been posed and the Fifth Amendment privilege is asserted,” Bransten said, according to the transcript.
Rajaratnam and his wife, Asha, along with Galleon Group co- founder Gary Rosenbach and his wife, Susan, sued Diversified in 2005, saying they were tricked into investing in an illegal tax shelter. The lawsuit sought to recover at least $15 million in interest, penalties and fees that Rajaratnam and Rosenbach paid to the U.S. Internal Revenue Service. It didn’t seek the taxes they paid.
Rajaratnam and Rosenbach won a 2009 arbitrators’ decision against Diversified and its president for $5.8 million, according to court records. Diversified and its founder were found to have committed fraud in the marketing, promotion and implementation of the tax shelter sold to Rajaratnam, Rosenbach and their wives.
In 2010, Diversified sued a tax attorney and three consulting firms over the structuring of the shelter and are seeking to depose Rajaratnam for that case. Bransten also granted an unopposed request from Diversified’s lawyers to question Rosenbach, who lives in Vail, Colorado.
Guha declined to comment on the ruling in a telephone interview. He told the judge that the questioning of his client under oath may open the door to “unrelated acts and other things of that nature” regarding uncharged crimes against the convicted fund manager, according to the transcript of the March 13 hearing.
Howard Kleinhendler, an attorney with Wachtel & Masyr who is representing Diversified, said he is aiming to question Rajaratnam sometime next month.
“I really think it’s going to be a question-by-question basis because the tax shelter at issue was something that he engaged in in 1999 and 2000 and I don’t really think he can take the fifth on any of that,” Kleinhendler said in a telephone interview. “I hope that on the issues that are relevant to my case he’s going to testify.”
The case is Diversified Group Inc. v. Marcum & Kleigman LLP, 450286/2010, New York State Supreme Court (Manhattan).
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