Raj Rajaratnam, the Galleon Group LLC co-founder who directed the largest hedge fund insider-trading scheme in U.S. history, will be deposed next week from federal prison as part of a tax-shelter lawsuit.
Rajaratnam is scheduled to give the deposition on July 16 at the Federal Medical Center Devens in Ayers, Massachusetts, where he began serving an 11-year sentence in December, said Howard Kleinhendler, an attorney representing the plaintiffs. Rajaratnam isn’t a defendant in the case.
New York state Supreme Justice Eileen Bransten in March ordered Rajaratnam to answer questions from Diversified Group, a tax-shelter promoter, as part of the 2010 suit. Samidh Guha, a lawyer representing Rajaratnam, had opposed the request, saying his client would invoke his right against self-incrimination under the U.S. Constitution’s Fifth Amendment at the deposition.
“It’s certainly a possibility,” Kleinhendler, an attorney representing Diversified Group, said in a phone interview. “We’ll only know once we get there.”
Guha didn’t immediately return a voice-mail message left at his office after regular business hours seeking comment on the deposition.
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 arbitrator’s 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 they are seeking to depose Rajaratnam in that case.
Bransten also granted an unopposed request from Diversified’s lawyers to question Rosenbach, who lives in Vail, Colorado. Rosenbach will be deposed next month in New York, Kleinhendler said.
While Rajaratnam was questioned for two days in 2007 as part of his lawsuit against Diversified, Bransten said during a hearing in March that his testimony can’t be introduced in the current case until he’s deposed, according to a transcript.
“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.
The case is Diversified Group Inc. v. Marcum & Kleigman LLP, 450286/2010, New York State Supreme Court (Manhattan).