Former hedge-fund manager Rengan Rajaratnam’s own words prove he conspired with his brother, imprisoned Galleon Group LLC co-founder Raj Rajaratnam, to commit insider trading, a prosecutor told jurors on the eve of deliberations.
Assistant U.S. Attorney Randall Jackson today cited secretly recorded calls between the two brothers in which Rengan refers to an alleged supplier of inside information as a “scumbag” and says the tipper was “a little bit dirty” as evidence of their scheme to milk sources for illegal information.
“Why is he referring to him as a ‘scumbag’?” Jackson asked the jury. “That’s not the kind of comment you have when you’re talking to someone about normal business.”
Rengan Rajaratnam, 43, is accused of conspiring with his brother to get nonpublic information in 2008 to trade ahead of deals involving Advanced Micro Devices Inc. and Clearwire Corp. Raj Rajaratnam was convicted of insider trading in 2011 and is serving an 11-year prison term.
Rengan’s lawyer told the jurors the government failed to prove its case and had merely sought to go after his client because of evidence developed against his older brother.
“Rengan didn’t know what Raj knew, and the trading records, all the records, undermine the prosecution’s charge,” the lawyer, Daniel Gitner, said in his closing argument. “Today is the day that you’re in the position to know that Rengan is not guilty.”
U.S. District Judge Naomi Reice Buchwald in Manhattan told the jury that she planned to give them legal instructions tomorrow, after which they will begin deliberating.
Buchwald also told the panel she had dismissed two fraud counts related to trades in Clearwire, leaving only a conspiracy charge, which carries a maximum penalty of five years in prison.
“You may not rely upon evidence of Rengan Rajaratnam’s trades in Clearwire,” she said before the closing arguments.
Rengan Rajaratnam, who worked his way up through Steven A. Cohen’s SAC Capital Advisors LP until he became a fund manager at Galleon Group, is accused of conspiring with his brother and two others: Anil Kumar, then a director at McKinsey & Co., and Danielle Chiesi, a securities analyst.
Jurors heard how he returned to Galleon after closing a hedge fund he co-founded in 2004.
The prosecutor assailed the defense argument that Rengan Rajaratnam was an “emotionally abused younger brother” who had been manipulated into doing Raj’s bidding. He said Raj Rajaratnam allowed his brother to remain at Galleon even after losing at least $30 million in a bet on Bear Stearns just before it collapsed.
“The defendant wasn’t a teenager when he showed up at Galleon. He was 38,” Jackson said. “His brother refused to fire him even though he engaged in tremendous trading losses. I think most of us would pray to have an ‘abusive’ brother like that.”
The prosecutor also cited wiretapped calls between the brothers as evidence Rengan Rajaratnam independently sought information on AMD’s plans to spin off a microchip manufacturing business, as well as the fact that the chipmaker was getting a multibillion-dollar investment from Mubadala Development Co. of Abu Dhabi.
Jackson argued that Raj Rajaratnam was already getting tips from Kumar, who advised AMD on the deal and testified that he provided information in exchange for secret payments to a Swiss bank account. Jackson also said Rengan was trying to recruit a source involved in the Mubadala side of the deal.
Witnesses said that after Raj Rajaratnam was convicted, his brother moved to Brazil. During the trial, the judge let the jury hear testimony about Rengan’s statements in Rio de Janeiro upon learning he had been charged by the U.S.
“His first words were: ‘I am innocent, this is about my brother, not me. I want to go back and clear my name,’” Gitner reminded the jury today.
The case is U.S. v. Rajaratnam, 13-cr-00211, U.S. District Court, Southern District of New York (Manhattan).