THE GALLEON CRIMINAL CASE IS EXPANDED

The Government continued to build its insider trading case against Raj Rajaratnam and Danielle Chiesi, filing a superseding indictment on Tuesday. U.S. v. Rajaratnam, Case No. 09 mg 2306 (S.D.N.Y.). While the basic contours of the case remain the same, discussed here, the new indictment adds detail and additional claimed illegal trading profits building on new guilty pleas. Since the original indictment, the Government has obtained guilty pleas from:

• Anil Kumar (a former senior partner and director at international consulting giant McKinsey & Co.), who pleaded guilty to engaging in an insider trading scheme with Mr. Rajaratnam;

• Rajiv Goel (a former director in strategic investments at Intel Capital, the investment arm of Intel Corporation), who pleaded guilty to engaging in an insider trading scheme with Mr. Rajaratnam; and

• Mark Kurland, who pleaded guilty to engaging in an insider trading scheme with Ms. Chiesi. Mr. Kurland is a former senior executive at New Castle LLC, the fund where Ms Chiesi was employed and which is named as a defendant in the parallel SEC enforcement action discussed here.

The new allegations regarding Mr. Kumar’s involvement with Mr. Rajaratnam are substantially similar to those in the SEC’s recently amended complaint. According to the indictment, Mr. Kumar furnished defendant Rajaratnam with inside information about AMD’s planned acquisition of ATI from March through July of 2006. He also provided inside information regarding eBay. In return, Mr. Rajaratnam paid Mr. Kumar. The funds were wired off shore and then returned and invested in Galleon. Overall, Galleon is alleged to have made at least $24.5 million in profits from the information furnished by Mr. Kumar.

The superseding indictment also details about the claimed insider trading scheme of Messrs. Rajaratnam and Goel. The allegations here focus on transactions in the securities of Intel, transactions which have in large part been reflected in earlier charges. Mr. Goel is alleged to have tipped Mr. Rajaratnam in at least two instances about Intel. One was in April 2007, relating to Intel’s quarterly earnings announcement. A second was in 2008 regarding Intel’s plans to invest in a joint venture with Clearwire.

Overall, Messrs. Goel and Rajaratnam had, according to the Government, a relationship which ran from 2005 through 2009. During that period, Mr. Rajaratnam gave Mr. Goel money to assist with personal matters and earned profits in his personal trading account. Galleon is claimed to have made at least $3 million in illegal profits from the relationship.

In addition to the substantive charges, the superseding indictment contains a forfeiture count which seeks $49 million. The amount is based on $45 million in claimed illegal profits made by Galleon and another $4 million by New Castle.