Rajaratnam to pay SEC US$1.5m in civil suit

Bloomberg

Fri, Dec 28, 2012 - Page 15

Galleon Group LLC co-founder Raj Rajaratnam, who is serving 11 years in prison for insider trading, agreed to pay US$1.5 million to settle a civil case brought by the US Securities and Exchange Commission.

Rajaratnam agreed to pay US$1.3 million representing profits gained and losses avoided as a result of the conduct the commission alleged in the case, according to a filing on Wednesday in federal court in New York. He will also pay US$147,738 in interest.

Rajaratnam was convicted of directing the biggest hedge fund insider-trading scheme in US history. At trial, the government introduced 45 wiretap recordings, along with documents and testimony derived from the wiretaps.

The agreement yesterday stems from a civil case in which Rajaratnam is a co-defendant with one of his alleged sources of illicit information, former Goldman Sachs Group Inc director Rajat Gupta, who was sentenced to two years in prison for insider trading.

The US$1.5 million total disgorgement is in a case separate from a lawsuit in which Rajaratnam is appealing a record US$92.8 million penalty imposed by the commission. In that case, Rajaratnam had argued that he should not have to pay a civil penalty because the judge in the criminal case ordered him to pay a US$10 million fine and forfeit US$53.8 million.

Gupta was convicted by a jury in June of one count of conspiracy and three counts of securities fraud. He was accused of passing illegal information about New York-based Goldman Sachs to Rajaratnam, his friend and business partner. The jury convicted Gupta of twice passing information about Goldman Sachs to Rajaratnam, once on Sept. 23, 2008, and again on Oct. 23, 2008.

The commission had argued that Gupta should be required to pay the maximum civil penalty and is seeking US$15 million from him. Gupta has objected to paying that much.