(Adds details of SEC case, byline)
By Nate Raymond and Joseph Ax
NEW YORK, July 8 Rengan Rajaratnam, the younger
brother of convicted Galleon Group founder Raj Rajaratnam, was
cleared on Tuesday of conspiring to engage in insider trading
while at the hedge fund, ending a five-year winning streak by
After deliberating for less than four hours, a federal jury
in New York found Rengan Rajaratnam, a former portfolio manager
at Galleon, not guilty of the one conspiracy count he faced
following the mid-trial dismissal by a judge of two more serious
Rajaratnam, 43, who was living in Brazil at the time of his
indictment, hugged his lawyers after the jurors were dismissed.
"You can go back to Brazil for the finals," U.S. District
Judge Naomi Reice Buchwald said, referring to the World Cup.
"Absolutely," Rajaratnam said.
Three years after jurors in the same courthouse convicted
Raj Rajaratnam, 57, for an insider trading scheme that resulted
in $63.8 million in illicit profit. He is serving an 11-year
Before Tuesday, a crackdown on insider trading led by
Manhattan U.S. Attorney Preet Bharara's office had resulted in
the conviction of 81 people with no acquittals since October
"While we are disappointed with the verdict on the sole
count that the jury was permitted to consider, we respect the
jury trial system whatever the outcome," Bharara said in a
Several jurors said prosecutors failed to show Rengan
Rajaratnam knowingly conspired with his brother.
"We felt like a lot of the trial was about Raj," said juror
Catherine Wolcott, a graphic designer. "We were waiting to hear
more about Rengan, who was the actual person on trial. By the
end, we were all like, 'Where's the evidence?'"
The acquittal followed significant setbacks in the case.
Rengan Rajaratnam faced six counts of securities fraud and the
conspiracy charge when first indicted in March 2013.
Four securities fraud charges were dropped pretrial and
Buchwald dismissed two fraud counts for lack of evidence after
the prosecution rested its case.
The government claimed a tip to Raj Rajaratnam in March 2008
- that Intel Corp was planning to invest $1 billion in
technology company Clearwire - enabled Galleon to reap $700,000
and Rengan to earn $100,000.
Prosecutors said the tip came from Rajiv Goel, a former
Intel executive who pleaded guilty in 2010 and was sentenced to
two years of probation.
After Buchwald tossed out charges that Rajaratnam traded in
Clearwire, prosecutors were limited to arguing the brothers
conspired to engage in insider trading in the company and
Advanced Micro Devices Inc.
Prosecutors said in August 2008 Raj Rajaratnam told his
brother of a "handshake" deal between AMD and an Abu Dhabi
state-owned company he learned about from Anil Kumar, a McKinsey
& Co partner.
In a wire tapped recording of a call that same day, Rengan
Rajaratnam told his brother he had talked with another McKinsey
partner, David Palecek, who "spilled his beans" and encouraged
him to buy AMD.
Despite trading on the tip, Galleon sold AMD for a loss due
to market declines, prosecutors said. Rengan Rajaratnam,
meanwhile, earned $40,000 personally trading AMD, prosecutors
Kumar pleaded guilty in 2010 and was later sentenced to two
years of probation. Palecek died in 2010.
Rengan Rajaratnam's attorney, Daniel Gitner, said his client
was simply seeking investment advice from Palecek. Gitner said
Tuesday his client "looks forward to getting on with his life."
"Today is the day Rengan has been waiting for," he said.
Wolcott, the juror, said she did not think Rengan Rajaratnam
intended to engage in any illicit trading.
"He was probably just trying to impress his brother," she
said. "Raj kept his cards close to the vest. Rengan was sort of
a puppy playing in the field, trying to get his attention."
While Rengan Rajaratnam was not convicted of criminal
charges, there is a pending civil lawsuit by the U.S. Securities
and Exchange Commission.
The lawsuit contends that there was a broader scheme
involving additional stocks and trading during his time at Sedna
Capital Management, a fund he founded and worked at until 2007.
That case, which had been suspended during the criminal
case, will likely be reactivated. A spokeswoman for the SEC did
not immediately respond to request for comment.
The case is U.S. v. Rajaratnam, U.S. District Court,
Southern District of New York, No. 13-00211.
(Editing by Noeleen Walder, Nick Zieminski, Jonathan Oatis and