NEW YORK (Reuters) - In 2011, former billionaire and hedge fund manager Raj Rajaratnam was convicted for insider trading and sentenced to 11 years in prison.
When his younger brother goes to trial on Tuesday in his own insider trading trial in New York, he hopes for a better fate.
U.S. prosecutors accuse Rengan Rajaratnam, a former portfolio manager at Raj Rajaratnam’s Galleon Group, of engaging in an insider trading scheme with his brother involving technology companies Clearwire Corp and Advanced Micro Devices Inc AMD.N in 2008.
Daniel Gitner, his lawyer, declined comment. He has argued prosecutors lacked evidence Rengan Rajaratnam, 43, knew any inside information was disclosed for a personal benefit.
A guilty verdict would continue an unbroken insider trading trial winning streak for Manhattan U.S. Attorney Preet Bharara’s office, which has secured convictions of 81 people since October 2009.
Jurors are expected to hear recordings of FBI wiretaps, which featured prominently in the trial of Raj Rajaratnam.
According to the indictment, in March 2008, Rajiv Goel, a then-Intel Corp (INTC.O) executive, learned the company planned to invest $1 billion in Clearwire. Raj Rajaratnam passed on the information to his brother, who later called him to complain when a news report of the deal surfaced, prosecutors said.
“So I don’t know how much you got in today,” Rengan Rajaratnam told him, according to the indictment, “but I think (Clearwire’s share price) is gonna rip tomorrow.”
The price climbed the next day, enabling Rengan Rajaratnam to earn $100,000 personally and Galleon to reap $700,000, prosecutors said.
That August, Raj Rajaratnam told his brother of a “handshake” deal between AMD and two Abu Dhabi-owned investment companies he learned about from Anil Kumar, a McKinsey & Company partner, the indictment said.
The same day, Rengan Rajaratnam told Raj that another McKinsey partner, David Palecek, had “spilled his beans” about investments in AMD, prosecutors said.
Despite trading on the tip, Galleon sold AMD for a loss due to overall market declines, prosecutors said.
Kumar and Goel pleaded guilty, testified at Raj Rajaratnam’s trial and were sentenced in 2012 to two years probation. Palecek died in 2010; his lawyer has said no proof exists he agreed to provide inside information.
Rengan Rajaratnam faces three counts of conspiracy and securities fraud, after prosecutors dropped four other charges.[ID:nL1N0O21V0]
The U.S. Securities and Exchange Commission has also sued Rengan Rajaratnam, claiming he also traded on inside information about stocks including Polycom Inc PLCM.O and Hilton Hotels while at Sedna Capital Management, where he worked from 2004 to 2007.
Before Sedna, he worked as an analyst at Steven A. Cohen’s SAC Capital Advisors, which last year pleaded guilty to fraud charges and agreed to pay $1.8 billion in criminal and civil penalties. A federal judge in May barred prosecutors from mentioning Rengan Rajaratnam’s employment at SAC during his trial.
The case is U.S. v. Rajaratnam, U.S. District Court, Southern District of New York, No. 13-00211.
Reporting by Nate Raymond; Editing by Noeleen Walder and Grant McCool