Rajaratnam says U.S. pushed to turn on friend: report

Galleon hedge fund founder Raj Rajaratnam departs Manhattan Federal Court after his sentencing in New York October 13, 2011.

NEW YORK (Reuters) - Just weeks before fallen hedge fund tycoon Raj Rajaratnam was sentenced to 11 years in prison for insider trading, U.S. prosecutors pressed him to turn on his friend, former Goldman Sachs Group Inc director Rajat Gupta, Newsweek Daily Beast reported.

In his first interview about his case, Rajaratnam was quoted as saying that he was initially asked on the day of his October 16, 2009 arrest to "wear a wire" and record conversations with Gupta, also a longtime global head of elite consultancy McKinsey & Co.

The article, posted at bit.ly/oSXZ8T, said prosecutors asked Sri Lankan-born Rajaratnam again as late as two weeks before his October 13 sentencing in Manhattan federal court.

"They wanted me to plea bargain," it quotes the Galleon Group founder as saying, in an interview at his Manhattan apartment where he is under house arrest. "They want to get Rajat. I am not going to do what people did to me. Rajat has four daughters."

The opinion of a Sri Lankan astrologist combined with a history of suspected persecution led to Rajaratnam's decision to fight the case, despite extensive phone taps and other overwhelming evidence, the report said.

"He (the astrologer) said that eventually I would prevail," Rajaratnam, 54, was quoted by the The Daily Beast as saying.

A spokeswoman for Rajaratnam's lawyers at law firm Akin Gump declined to comment on Monday.

Ellen Davis, a spokeswoman for the office of the Manhattan U.S. Attorney, said in an emailed statement: "This article appears to be based on an interview with Mr. Rajaratnam and a number of his assertions are inaccurate."

A spokesman for Gupta's lawyer, Gary Naftalis, referred to previous statements that his client had done nothing wrong and that a civil case brought by the U.S. Securities and Exchange Commission was baseless.

The insider-trading investigation featured extensive use of secret FBI phone taps. Such tactics usually are reserved for Mafia and drug trafficking investigations, but the hedge fund manager and several of his South Asian business associates and friends were recorded or agreed to be recorded.

Rajaratnam, the central figure in a sprawling insider trading case, was convicted by a jury in May on all 14 criminal charges he faced. His 11-year prison sentence is the longest ever in an insider-trading case. He must report to prison on November 28.

Rajaratnam told the newspaper he respected the U.S. justice system.

"In Sri Lanka I would have given the judge 50,000 rupees and he'd be sitting having dinner at my house," Rajaratnam was quoted as saying. "Here, I got my shot. The American justice system is by and large fair."

The case is USA v Raj Rajaratnam et al, U.S. District Court for the Southern District of New York, No. 09-01184.

(Reporting by Grant McCool; Editing by Tim Dobbyn and Gerald E. McCormick)