Rengan Rajaratnam, the brother of Galleon Group LLC co-founder Raj Rajaratnam, became the first of at least 88 people charged in a federal crackdown on insider trading to escape conviction.
A federal jury in New York after little more than three hours of deliberations today found Rengan Rajaratnam not guilty of scheming with his older brother to commit insider trading in 2008.
It’s the only trial loss in the crackdown on insider trading at hedge funds for Manhattan U.S. Attorney Preet Bharara and the Federal Bureau of Investigation. Of those charged since 2009, at least 81 had been convicted at trials or had pleaded guilty. Rengan Rajaratnam was one of at least 10 people whose case went to trial. He was living in Brazil when he learned of his indictment.
“Go back to Brazil for the finals,” U.S. District Judge Naomi Reice Buchwald told him following the verdict and after she canceled his bail, in reference to the pending World Cup soccer match.
Rengan Rajaratnam, 43, smiled and replied: “Absolutely.”
He was accused of conspiring with his older brother Raj to get nonpublic information in 2008 to trade ahead of deals involving Advanced Micro Devices Inc. (AMD) and Clearwire Corp. Raj Rajaratnam, the co-founder of Galleon Group LLC, was convicted of insider trading after a trial in 2011 and is serving an 11-year prison term.
During the trial, which began June 17 with jury selection, prosecutors argued phone conversations between the two brothers, secretly recorded by the FBI, proved Rengan Rajaratnam entered into a scheme to get illegal tips using Raj’s Rolodex of insiders.
Rengan’s lawyer, Daniel Gitner, said the government failed to prove its case and charged his client only based on evidence gathered against his older brother.
Raj Rajaratnam manipulated Rengan into doing his bidding, Gitner said. The government failed to prove Rengan knew what Raj was up to, who provided the illegal tips and what, if any, benefit the insiders received, Gitner said.