Raj Rajaratnam
Encyclopedia
Raj Rajaratnam is an American former hedge fund manager and founder of the Galleon Group
Galleon Group
Galleon Group was one of the largest hedge fund management firms in the world, managing over $7 billion, before closing in October 2009. The firm was at the center of a 2009 insider trading scandal that resulted in investors pulling capital from the firm rapidly...

, a New York-based hedge fund
Hedge fund
A hedge fund is a private pool of capital actively managed by an investment adviser. Hedge funds are only open for investment to a limited number of accredited or qualified investors who meet criteria set by regulators. These investors can be institutions, such as pension funds, university...

 management firm. On October 16, 2009, he was arrested by the FBI on allegations of insider trading
Insider trading
Insider trading is the trading of a corporation's stock or other securities by individuals with potential access to non-public information about the company...

, which also caused the Galleon Group to close. He stood trial in U.S. v Rajaratnam (09 Cr. 01184) in the United States District Court for the Southern District of New York
United States District Court for the Southern District of New York
The United States District Court for the Southern District of New York is a federal district court. Appeals from the Southern District of New York are taken to the United States Court of Appeals for the Second Circuit The United States District Court for the Southern District of New York (in case...

, and on May 11, 2011 was found guilty on all 14 counts of conspiracy and securities fraud. On October 13, 2011, Rajaratnam was sentenced to 11 years in prison.

Background and career

Rajaratnam, an ethnic Sri Lankan Tamil was born in Colombo
Colombo
Colombo is the largest city of Sri Lanka. It is located on the west coast of the island and adjacent to Sri Jayawardenapura Kotte, the capital of Sri Lanka. Colombo is often referred to as the capital of the country, since Sri Jayawardenapura Kotte is a satellite city of Colombo...

 in the Dominion of Ceylon
Dominion of Ceylon
The Dominion of Ceylon, known today as Sri Lanka, was a dominion, in the British Empire between 1948 and 1972. In 1948, British Ceylon was granted independence as the Dominion of Ceylon. In 1972, the Dominion of Ceylon became a republic within the Commonwealth, and its name was changed to Sri Lanka...

, present-day Sri Lanka. His father was the head of the Singer Sewing Machine Co.
Singer Corporation
Singer Corporation is a manufacturer of sewing machines, first established as I.M. Singer & Co. in 1851 by Isaac Merritt Singer with New York lawyer Edward Clark. Best known for its sewing machines, it was renamed Singer Manufacturing Company in 1865, then The Singer Company in 1963. It is...

 in South Asia. According to the newspaper The Island, he attended S. Thomas' College, Mount Lavinia, though other sources say he attended S. Thomas' Preparatory School, Kollupitiya. Rajaratnam’s family emigrated to England in 1971, "sensing that the [post-independence Sri Lankan ethnic] situation would get more violent". Rajaratnam studied engineering at the University of Sussex
University of Sussex
The University of Sussex is an English public research university situated next to the East Sussex village of Falmer, within the city of Brighton and Hove. The University received its Royal Charter in August 1961....

 and then earned an M.B.A. from Wharton School of the University of Pennsylvania
Wharton School of the University of Pennsylvania
The Wharton School is the business school of the University of Pennsylvania, an Ivy League university in Philadelphia, Pennsylvania. Wharton was the world’s first collegiate business school and the first business school in the United States...

 in 1983. He is married with three children and maintains residences in Connecticut
Connecticut
Connecticut is a state in the New England region of the northeastern United States. It is bordered by Rhode Island to the east, Massachusetts to the north, and the state of New York to the west and the south .Connecticut is named for the Connecticut River, the major U.S. river that approximately...

, New York, Georgetown (DC) and Florida.

According to Forbes
Forbes
Forbes is an American publishing and media company. Its flagship publication, the Forbes magazine, is published biweekly. Its primary competitors in the national business magazine category are Fortune, which is also published biweekly, and Business Week...

magazine, Rajaratnam is a self-made billionaire hedge fund manager. He was the 236th richest American in 2009, with an estimated net worth of $1.8 billion. He was the 262nd richest American in 2008, with an estimated net worth of $1.5 billion. In 2009 he was the richest Sri Lankan-born individual in the world.

Rajaratnam started his career as a lending officer at Chase Manhattan Bank
Chase Manhattan Bank
JPMorgan Chase Bank, N.A., doing business as Chase, is a national bank that constitutes the consumer and commercial banking subsidiary of financial services firm JPMorgan Chase. The bank was known as Chase Manhattan Bank until it merged with J.P. Morgan & Co. in 2000...

 where he made loans to high-tech companies. He joined the investment banking boutique Needham & Co. as an analyst in 1985, where his focus was on the electronics industry. He became the head of research in 1987 and the president in 1991, at the age of 34. At the company's behest, he started a hedge fund – the Needham Emerging Growth Partnership – in March 1992, which he later bought and renamed Galleon
Galleon
A galleon was a large, multi-decked sailing ship used primarily by European states from the 16th to 18th centuries. Whether used for war or commerce, they were generally armed with the demi-culverin type of cannon.-Etymology:...

.

His hedge fund
Hedge fund
A hedge fund is a private pool of capital actively managed by an investment adviser. Hedge funds are only open for investment to a limited number of accredited or qualified investors who meet criteria set by regulators. These investors can be institutions, such as pension funds, university...

 was valued at $3.7 billion in 2009, down from a peak of $7 billion in 2008. According to a 2009 investor letter his $1.2 billion Diversified Fund had a net annualized return of 22.3%. Rajaratnam has been featured among the elite US money managers in a book called The New Investment Superstars. Initially invested in technology stocks and healthcare companies, he says his best ideas came from frequent visits with companies and conversations with executives who invest in his fund.

After his arrest, Galleon received requests from investors for the withdrawal of $1.3 billion, causing the fund to close. In a letter dated October 21, 2009, Rajaratnam informed his employees and investors that he intended to wind down all the hedge funds of the Galleon Group
Galleon Group
Galleon Group was one of the largest hedge fund management firms in the world, managing over $7 billion, before closing in October 2009. The firm was at the center of a 2009 insider trading scandal that resulted in investors pulling capital from the firm rapidly...

. Investors received their entire money back in January 2010, plus profits.

Contributions to charitable and political organizations

In November 2009, Rajaratnam pledged to donate $1 million to help with the rehabilitation of the LTTE
Liberation Tigers of Tamil Eelam
The Liberation Tigers of Tamil Eelam was a separatist militant organization formerly based in northern Sri Lanka. Founded in May 1976 by Vellupillai Prabhakaran, it waged a violent secessionist and nationalist campaign to create an independent state in the north and east of Sri Lanka for Tamil...

 combatants. He has donated generously to clear land mines in the war-affected areas in Sri Lanka. He recalled his visits to the mine-impacted areas of Sri Lanka
Sri Lanka
Sri Lanka, officially the Democratic Socialist Republic of Sri Lanka is a country off the southern coast of the Indian subcontinent. Known until 1972 as Ceylon , Sri Lanka is an island surrounded by the Indian Ocean, the Gulf of Mannar and the Palk Strait, and lies in the vicinity of India and the...

 and underscored the humanitarian toll that mines have taken. Recalling his encounter with a young child in Kilinochchi
Kilinochchi
Kilinochchi is a city in the Kilinochchi District, part of the Northern Province of Sri Lanka. Kilinochchi is situated at the A9 road some south-east of Jaffna...

 who had lost both legs to a landmine, Rajaratnam stated that this particular image that is etched in his memory “made it an easy decision to write the check.” He helped Sri Lankans recover after the 2004 Tsunami. Mr. Rajaratnam was also a contributor to various causes that promoted development in the Indian subcontinent and programs that benefited lower-income South Asian youth in the New York area.

According to the Federal Election Commission
Federal Election Commission
The Federal Election Commission is an independent regulatory agency that was founded in 1975 by the United States Congress to regulate the campaign finance legislation in the United States. It was created in a provision of the 1975 amendment to the Federal Election Campaign Act...

, Rajaratnam has made over $118,000 in political contributions in the past five years. He has also contributed to the Democratic National Committee
Democratic National Committee
The Democratic National Committee is the principal organization governing the United States Democratic Party on a day to day basis. While it is responsible for overseeing the process of writing a platform every four years, the DNC's central focus is on campaign and political activity in support...

 and various campaigns on behalf of Barack Obama
Barack Obama
Barack Hussein Obama II is the 44th and current President of the United States. He is the first African American to hold the office. Obama previously served as a United States Senator from Illinois, from January 2005 until he resigned following his victory in the 2008 presidential election.Born in...

, Hillary Rodham Clinton
Hillary Rodham Clinton
Hillary Diane Rodham Clinton is the 67th United States Secretary of State, serving in the administration of President Barack Obama. She was a United States Senator for New York from 2001 to 2009. As the wife of the 42nd President of the United States, Bill Clinton, she was the First Lady of the...

, Charles Schumer
Charles Schumer
Charles Ellis "Chuck" Schumer is the senior United States Senator from New York and a member of the Democratic Party. First elected in 1998, he defeated three-term Republican incumbent Al D'Amato by a margin of 55%–44%. He was easily re-elected in 2004 by a margin of 71%–24% and in 2010 by a...

, and Robert Menendez
Robert Menendez
Robert "Bob" Menendez is the junior United States Senator from New Jersey and a member of the Democratic Party. In January 2006, he was appointed to fill the U.S. Senate seat vacated by Jon Corzine, who resigned upon being elected Governor of New Jersey. Menendez was elected to his own full...

.

Controversy

He has also contributed $3.5 million to the Tamils Rehabilitation Organisation
Tamils Rehabilitation Organisation
The Tamils Rehabilitation Organisation was established in 1985 in Tamil Nadu in southeastern India by Tamil refugees fleeing the violence in North and East Sri Lanka. Its operation to provide relief to the refugees in India continued until 1987...

 (TRO), a group whose assets were frozen by the USA due to its alleged close connections to the Tamil Tigers (LTTE) which are proscribed as a terrorist organization in 32 countries. TRO's offices were raided by the FBI in 2006 but the organization was never charged with any wrongdoing.

Selvarasa Pathmanathan, who was appointed LTTE chief after the death of Prabhakaran has said that Rajaratnam contributed lavishly to the LTTE and its sympathizers in the West.

The Sri Lankan government has stated that Rajaratnam had contributed for several years of the Sri Lankan Civil War
Sri Lankan civil war
The Sri Lankan Civil War was a conflict fought on the island of Sri Lanka. Beginning on July 23, 1983, there was an on-and-off insurgency against the government by the Liberation Tigers of Tamil Eelam , a separatist militant organization which fought to create an independent Tamil state named Tamil...

 to the LTTE with millions of US dollars and that he was under investigation in Sri Lanka
Sri Lanka
Sri Lanka, officially the Democratic Socialist Republic of Sri Lanka is a country off the southern coast of the Indian subcontinent. Known until 1972 as Ceylon , Sri Lanka is an island surrounded by the Indian Ocean, the Gulf of Mannar and the Palk Strait, and lies in the vicinity of India and the...

. However, the senior military official could not give specific details about the alleged contributions to the LTTE. Rajaratnam had recently pledged a $1 million to rehabilitate former LTTE combatants.

Arrest for insider trading

On Friday October 16, 2009, Raj Rajaratnam was arrested by the FBI and accused of conspiring with others in insider trading
Insider trading
Insider trading is the trading of a corporation's stock or other securities by individuals with potential access to non-public information about the company...

 in several publicly traded companies. U.S. Attorney Preet Bharara
Preet Bharara
Preetinder S. Bharara , commonly known as Preet Bharara, is U.S. Attorney for the Southern District of New York.-Early life and education:Bharara was born in 1968 in Firozpur, Punjab, India, to a Sikh father and Hindu mother...

 put the total profits in the scheme at over $60 million, telling a news conference it was the largest hedge fund insider trading case in United States history. Jim Walden, an attorney for Mr. Rajaratnam, said his client is innocent and will fight the insider-trading charges.

Rajaratnam allegedly profited from information received from Robert Moffat, an IBM
IBM
International Business Machines Corporation or IBM is an American multinational technology and consulting corporation headquartered in Armonk, New York, United States. IBM manufactures and sells computer hardware and software, and it offers infrastructure, hosting and consulting services in areas...

 executive, Rajiv Goel
Rajiv Goel
Rajiv Goel was a midlevel executive at Intel. He was a managing director in Intel's treasury department and a director of strategic investments at Intel Capital....

, an Intel Capital executive, and Anil Kumar
Anil Kumar (businessman)
Anil Kumar was a longtime top senior partner and director at management consultancy McKinsey & Company, the co-founder of the Indian School of Business with Rajat Gupta, and the creator of two different types of outsourcing...

, a McKinsey & Company
McKinsey & Company
McKinsey & Company, Inc. is a global management consulting firm that focuses on solving issues of concern to senior management. McKinsey serves as an adviser to many businesses, governments, and institutions...

 executive. It was reported that Rajaratnam, Goel and Kumar were all part of the class of 1983 from Wharton business school
Wharton School of the University of Pennsylvania
The Wharton School is the business school of the University of Pennsylvania, an Ivy League university in Philadelphia, Pennsylvania. Wharton was the world’s first collegiate business school and the first business school in the United States...

.

Another defendant in the same case, Roomy Khan, was previously convicted in U.S. District Court, Northern District of California in 2002 of wire fraud, for providing inside information from her employer, Intel, to Rajaratnam.

The Sri Lankan stock market fell sharply after his arrest on insider trading charges in October 2009. Sri Lanka's Securities and Exchange Commission is reviewing the active stock trading of Raj Rajaratnam with a view of identifying any insider trading.

It said he also conspired to get confidential information on the $5 billion purchase by Warren Buffett
Warren Buffett
Warren Edward Buffett is an American business magnate, investor, and philanthropist. He is widely regarded as one of the most successful investors in the world. Often introduced as "legendary investor, Warren Buffett", he is the primary shareholder, chairman and CEO of Berkshire Hathaway. He is...

’s Berkshire Hathaway
Berkshire Hathaway
Berkshire Hathaway Inc. is an American multinational conglomerate holding company headquartered in Omaha, Nebraska, United States, that oversees and manages a number of subsidiary companies. The company averaged an annual growth in book value of 20.3% to its shareholders for the last 44 years,...

 of Goldman preferred stock before the September 2008 announcement of that transaction. The Wall Street Journal reported in April that a former member of the board of directors of Goldman Sachs
Goldman Sachs
The Goldman Sachs Group, Inc. is an American multinational bulge bracket investment banking and securities firm that engages in global investment banking, securities, investment management, and other financial services primarily with institutional clients...

 and former McKinsey & Company
McKinsey & Company
McKinsey & Company, Inc. is a global management consulting firm that focuses on solving issues of concern to senior management. McKinsey serves as an adviser to many businesses, governments, and institutions...

 chief executive Rajat Gupta
Rajat Gupta
Rajat Kumar Gupta was the managing director of management consultancy McKinsey & Company from 1994 to 2003 and a business leader in India and the United States...

 told Rajaratnam about Berkshire's investment before it became public. Gupta stood to profit as would-be chairman of Galleon International, a co-founder of New Silk Route
New Silk Route
- History and leadership :NSR was initially named Taj Capital. Its founding team included, at various points:* Rajat Gupta, former managing partner at McKinsey & Company* Parag Saxena, former managing partner of Invesco Capital and Vedanta Capital...

 with Rajaratnam, and as a friend of Rajaratnam. In March 2011 Gupta was charged in an administrative proceeding by the SEC. Gupta maintained his innocence, countersued, won dismissal of the administrative charge, then was arrested on criminal charges.

On May 11, 2011, Rajaratnam was found guilty on all 14 counts of conspiracy and securities fraud. On October 13, 2011, Rajaratnam was sentenced to 11 years in prison. This is the longest prison sentence ever handed out for insider trading. The thirteen other defendants connected to Rajaratnam's case received prison sentences averaging three years each.

Just before Rajat Gupta's arrest in October, 2011, Rajaratnam was reported to have said that the prosecutors had wanted him to wear a wire and tape his conversations with Gupta. "It was Rajaratnam’s understanding that were he to plead guilty and wear a wire, he might be offered a sentence of as little as five years. With good behavior, he could be out in 85 percent of that time," the report continued. Rajaratnam had not yet at that point, however, cooperated with the prosecutors and had received his 11-year sentence. There was no sign that he would cooperate at any future point.

Film

108 Production has announced a film entitled "Billion Dollar Raja" inspired by the story of Raj Rajaratnam described as "an investigative financial mafia drama inspired by the true story of Galleon Group founder Mr. Raj Rajaratnam, his network of Wall Street honchos, big corporate insiders, employees and a prosecution team determined to punish those involved in the most complex insider trading case in history through secret wire-tap recordings." The film will be written and directed by Nayan Padrai
Nayan Padrai
Nayan Padrai is an award-winning screenwriter, producer, and director. Nayan co-wrote, produced, and directed his first feature film When Harry Tries to Marry released in the US on April 22, 2011...

 and produced by Sheetal Vyas
Sheetal Vyas
Sheetal Vyas is a film producer.Sheetal produced her first feature film When Harry Tries to Marry released in the US on April 22, 2011. She also produced the film’s soundtrack.-Early life:...

.
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