Insider trading trial of Rajaratnam's brother goes to jury

NEW YORK, July 8 Tue Jul 8, 2014 11:14am EDT

NEW YORK, July 8 (Reuters) - Jurors began deliberating on Tuesday in the trial of Rengan Rajaratnam, younger brother of Galleon Group hedge fund founder Raj Rajaratnam, who prosecutors say conspired to engage in insider trading.

The federal jury in New York will weigh Rajaratnam's guilt on a single conspiracy count, after a judge last week dismissed two more charges that the former Galleon Group fund manager engaged in securities fraud by trading on inside information.

Four other securities fraud charges were dropped before the trial began, including two that U.S. District Judge Naomi Reice Buchwald said were "inconsistent" with other sections of the indictment.

The jury of four men and eight women includes a history professor, an auto parts delivery driver, a literary agent and a New York City sanitation worker.

Prosecutors contend that Rajaratnam, 43, engaged in an insider trading scheme with his brother involving technology companies Clearwire Corp and Advanced Micro Devices Inc in 2008.

Prosecutors had argued he earned $100,000 trading in Clearwire based on a tip his brother received about a $1 billion investment by Intel Corp.

But Buchwald dismissed securities fraud counts tied to that allegation last week, citing a lack of evidence.

Regarding AMD, prosecutors said that in August 2008, Raj Rajaratnam told his brother of a "handshake" deal between the company and an Abu Dhabi state-owned company he learned about from Anil Kumar, a McKinsey & Company partner.

In a wiretapped recording of a call that same day, Rengan Rajaratnam told his brother he had talked with another McKinsey partner, David Palecek, who was "a little dirty" and "kind of volunteered the information on the investments."

Despite trading on the tip, Galleon sold AMD for a loss due to overall market declines, prosecutors said. Rengan Rajaratnam earned $40,000 personally trading AMD, they said.

Daniel Gitner, Rajaratnam's lawyer, has argued there was no evidence his client knew about the tips or anything Raj Rajaratnam gave the insiders in exchange for disclosing the information.

Raj Rajaratnam, 57, was convicted of insider trading charges in 2011 and sentenced to 11 years in prison.

Kumar pleaded guilty to his role in the scheme and was sentenced in 2012 to two years' probation. Palecek died in 2010, and his lawyer has said there is no proof he agreed to provide inside information.

The case is U.S. v. Rajaratnam, U.S. District Court, Southern District of New York, No. 13-00211. (Additional reporting by Joseph Ax in New York; editing by Noeleen Walder and Matthew Lewis)