Raj Rajaratnam verdict shakes Wall Street

Sri Lankan-born Wall Street tycoon Raj Rajaratnam was convicted guilty of insider trading by a federal jury in Manhattan on Wednesday, in a verdict that ?shook and stirred? the hedge fund industry, media reports said.

The Galleon Group founder, who was convicted on all 14 counts, including fraud and conspiracy, could face up to 19 and a half years in jail, when he is sentenced on July 29, even as his legal path to the appeals path is being said to be very narrow.

Preet Bharara, the United States Attorney for the Southern District of New York, announced that Rajaratnam was found guilty by a jury in Manhattan federal court of conspiracy and securities fraud crimes stemming from his involvement in the largest hedge fund insider trading scheme in history.

Rajaratnam, 53, was the Managing Member of Galleon Management, LLC, the General Partner of Galleon Management, L.P., and a portfolio manager for Galleon Technology Offshore, Ltd., and certain accounts of Galleon Diversified Fund, Ltd.

He was convicted after an eight-week trial before U.S. District Judge Richard J Holwell.

Bharara stated: ?Raj Rajaratnam, once a high-flying billionaire and hedge fund manager, is now a convicted felon, 14 times over. Rajaratnam was among the best and the brightest?one of the most educated, successful, and privileged professionals in the country.

?Yet, like so many others recently, he let greed and corruption cause his undoing. The message today is clear?there are rules and there are laws, and they apply to everyone, no matter who you are or how much money you have.

?Unlawful insider trading should be offensive to everyone who believes in, and relies on, the market. It cheats the ordinary investor, victimizes the companies whose information is stolen, and is an affront not only to the fairness of the market, but the rule of law.

?In just over 18 months, this office has charged 47 individuals with insider trading crimes; Rajaratnam is the 35th person to be convicted. We will continue to pursue and prosecute those who believe they are both above the law and too smart to get caught.?

According to the superseding indictment filed in Manhattan federal court, other court documents, and statements made during related court proceedings, from 2003 to March 2009, Rajaratnam repeatedly traded on material, non-public information pertaining to upcoming earnings forecasts, mergers, acquisitions, and other business combinations.

This inside information was given as tips by insiders and others at hedge funds, public companies, and investor relations firms?including Goldman Sachs, Intel, IBM, McKinsey & Company, Moody?s Investor Services, Inc., Market Street Partners, Akamai Technologies, Inc., and Polycom, Inc.

Based on the Inside Information, Rajaratnam executed trades in the stock of public companies, including Goldman Sachs, Clearwire, Akamai, AMD, Intel, Polycom, and PeopleSupport, earning tens of millions of dollars.

Corporate big fish too were charged with Rajaratnam and have all previously pled guilty to insider trading charges.

Rajaratnam was found guilty of five counts of conspiracy to commit securities fraud and nine counts of securities fraud.

Each of the conspiracy counts carries a maximum sentence of five years in prison and a maximum fine of the greater of $250,000 or twice the gross gain or loss from the offense.

Each of the securities fraud counts carries a maximum sentence of 20 years in prison and a fine of $5 million.

Rajaratnam faces a maximum prison term of 205 years in total. Rajaratnam is scheduled to be sentenced on July 29, 2011, at 12:00 p.m.