U.S. District Judge Naomi Reice Buchwald in Manhattan ruled that the
indictment adequately alleged the essential elements of the crimes
Buchwald agreed that two securities fraud counts were "internally
inconsistent" with a conspiracy charge contained in the indictment.
But she withheld ruling on whether to dismiss them in order to allow
the government to decide whether to proceed on those charges.
A lawyer for Rajaratnam did not respond to a request for comment. A
spokeswoman for Manhattan U.S. Attorney Preet Bharara declined to
The case, set for a June 17 trial, is one of a wave of insider
trading prosecutions pursued by Bharara's office, resulting in 80
convictions since October 2009.
Raj Rajaratnam, founder of the hedge fund Galleon Group, received an
11-year prison sentence in October 2011 after a jury convicted him
on charges related to insider trading.
A grand jury subsequently indicted Rengan Rajaratnam, a former
portfolio manager at Galleon, in March 2013 on one conspiracy count
and six counts of securities fraud.
Prosecutors alleged that Rengan Rajaratnam, 43, had conspired with
his brother to trade on non-public information related to technology
companies and Clearwire Corp and Advanced Micro Devices Inc <AMD.N>,
netting $1.2 million in illegal profits.
Rajaratnam's lawyers had argued the indictment failed to charge that
he knew two alleged tippers of non-public information received
personal benefits in exchange for giving tips to Raj Rajaratnam.
The tippers, prosecutors said, were Rajiv Goel, an employee of Intel
Corp <INTC.O>, and Anil Kumar, a former McKinsey director. Both
admitted to providing tips to Rajaratnam and received probation in
2012 after pleading guilty and cooperating with the investigation.
In her ruling Friday, Buchwald said while the indictment did not
explicitly state the tippers received benefits, it provided enough
details to give Rajaratnam notice of the charges against him.
[to top of second column]
She added that the indictment's sufficiency was a separate issue
from whether she would require prosecutors at trial to prove
Rajaratnam knew of any benefits received by the tippers.
The issue is set to be considered Tuesday by the 2nd U.S. Circuit
Court of Appeals in an appeal by insider trading defendants Todd
Newman, a former portfolio manager at the hedge fund Diamondback
Capital Management, and Anthony Chiasson, co-founder of the hedge
fund Level Global Investors.
Newman and Chiasson were convicted in 2012 and subsequently
sentenced to 4-1/2 years and 6-1/2 years in prison, respectively.
With regard to the two "inconsistent" securities fraud counts
against Rajaratnam, Buchwald raised issue with how prosecutors could
allege in one part of the indictment that Raj Rajaratnam caused
Galleon funds to buy Clearwire stock and then later say Rengan
caused those stock purchases.
Buchwald said she would dismiss those two counts unless the
prosecutors offer "a coherent, logical theory as to how defendant
aided and abetted the alleged securities fraud."
She gave the government until May 1 to decide whether to move
forward on those counts.
The cases are U.S. v. Rajaratnam, U.S. District Court, Southern
District of New York, No. 13-cr-00211; and SEC v. Rajaratnam in the
same court, No. 13-01894.
(Reporting by Nate Raymond in New York;
editing by Leslie Adler and
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