NEW YORK (Reuters) - Billionaire hedge fund founder Raj Rajaratnam and five executives from some of the most prestigious U.S. companies were charged on Friday with the largest hedge fund insider-trading scheme ever.
Investigators said they used court-approved telephone wire taps for the first time in a Wall Street insider trading case, sending shivers through the hedge fund industry which has traditionally picked up and shared trading tips to make big profits.
At the center of the case are executives from hedge funds Galleon and New Castle, which was a unit of Bear Stearns Asset Management, and executives from major American companies such as IBM, top consulting firm McKinsey & Co and chip giant Intel Corp.
"This is not a garden-variety insider trading case," Preet Bharara, the U.S. Attorney for Manhattan, said at a news conference. He said the scheme made more than $20 million in illegal profits over several years.
One of the criminal complaints accuses Rajaratnam, 52, considered the richest Sri Lankan in the world, of conspiring with Intel employee Rajiv Goel and Anil Kumar, a director of powerful management consulting firm McKinsey & Co. The alleged offenses took place over three years starting in January 2006.
Galleon had as much as $7 billion under management, the complaint said. Intel Capital is the investment arm of Intel.
A second criminal complaint accused three other people -- Danielle Chiesi, Mark Kurland and Robert Moffat -- of insider trading crimes and earning millions of dollars in illegal profits.
"It shows that we are targeting white-collar insider trading rings with the same powerful investigative techniques that have worked so successfully against the mob and drug cartels," Bharara said.
All six were charged with securities fraud and conspiracy in two criminal complaints filed in U.S. District Court in New York.
They are under arrest and they were also charged in a separate civil complaint by the U.S. Securities and Exchange Commission (SEC). The SEC said the accused traded on insider information from 10 companies.
SCHEME TARGETED TOP COMPANY STOCKS
The companies included Hilton Hotels Corp, Google Inc, IBM, Advanced Micro Devices Inc and several other companies.
The prosecutor also fired a warning shot for the rest of Wall Street.
"Today, tomorrow, next week, the week after, privileged Wall Street insiders who are considering breaking the law will have to ask themselves one important question: Is law enforcement listening?" he said.
Securities fraud charges carry possible maximum prison sentences of up to 20 years. Continued...
- Re: U.S. charges billionaire Rajaratnam with record insider tradingposted on 10/17/2009
It is a good sign.
The prosecutor also fired a warning shot for the rest of Wall Street.
"Today, tomorrow, next week, the week after, privileged Wall Street insiders who are considering breaking the law will have to ask themselves one important question: Is law enforcement listening?" he said.
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