(Corrects the number of counts the judge called "inconsistent"
from four to two in 3rd, 16th and 17th paragraphs)
By Nate Raymond
NEW YORK, April 18 Rengan Rajaratnam, the
younger brother of imprisoned hedge fund manager Raj Rajaratnam,
on Friday lost a bid to dismiss some of the insider trading
charges leveled against him last year.
U.S. District Judge Naomi Reice Buchwald in Manhattan ruled
that the indictment adequately alleged the essential elements of
the crimes charged.
Buchwald agreed that two securities fraud counts were
"internally inconsistent" with a conspiracy charge contained in
But she withheld ruling on whether to dismiss them in order
to allow the government to decide whether to proceed on those
A lawyer for Rajaratnam did not respond to a request for
comment. A spokeswoman for Manhattan U.S. Attorney Preet Bharara
declined to comment.
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, netting $1.2 million in illegal
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, 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
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,
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 Richard Chang)