have charged Galleon Group founder Raj Rajaratnam and six
others with perpetrating a $20 million insider trading scheme.
This latest news is part of a longer string of obstacles faced
by Rajaratnam, who has had prior run-ins with the law, as
Galleon's travels, AR's August 2008 profile of the firm,
portions of which are reprinted below. That story is now free
to nonsubscribers for a limited time.
Most notably, in May 2005, Galleon agreed to pay the bulk
of a $2.4 million fine to settle charges made by the SEC. The
regulator claimed Galleon, Oaktree Capital Management and DB
Investment Managers had engaged in illegal short selling. All
three firms settled without admitting or denying the charges,
but Galleon paid the biggest fine: $2.02 million. The SEC
alleged Galleon made illegal gains of more than $1 million in
defiance of anti-manipulation regulations by illegally
covering short sales with securities purchased in follow-on
offerings The trades were made on 17 offerings from 2000 to
2003. Galleon settled yet another lawsuit last year. A former
female employee accused the firm of sexual discrimination and
breach of contract over compensation.
Litigation isn't uncommon at hedge funds, but the number
and variety of allegations against Galleon add fodder to the
claims of some that Rajaratnam is a difficult and arrogant
man. "One incident, and there's no cause for concern. But
once you get a couple, you think, 'where there's smoke,
there's fire,'" says a former investor. Following Sud's
departure, "there were a lot of moving parts, teams changing,
new initiatives and poor performance," says another former
investor. The same comment holds true today. The issue is
whether Rajaratnam will once again be able to transform his
More news on Galleon and Rajaratnam:
Galleon's Deutsch resurfaces (Sep 28, 2009)
Todd Deutsch launches a long-short trading fund.
Galleon's travels (Aug 26, 2008)
Raj Rajaratnam has steered his ship through rough seas before.
But the departure of a senior partner, the closure of a big
fund and losses at his two main funds are leading him into
uncharted waters as he opens Asian macro and private equity
funds. Can he admiral an entire fleet?
Good-bye, Rainmaker (Jul, 1 2008)
is Todd Deutsch's last month at the Galleon
departure seems to be a watershed moment for Galleon, which in
trying to establish itself as a more institutional player is
adopting an approach that may be at odds with Deutsch's more
aggressive trading style.
Best-Paid Hedge Fund Managers (Apr, 15
Ship of Dreams (September 12, 2006)
Galleon founder Raj Rajaratnam is rebuilding lives in his
native Sri Lanka - one house at a time.