Rajaratnam found guilty on all insider trading charges

The hedge fund founder could face up to 20 years in prison for securities fraud and conspiracy, when the sentence is announced on 29th July

New York: Raj Rajaratnam, the hedge fund founder at the centre of the largest insider trading case in US history, was on Wednesday found guilty on all 14 counts of securities fraud and conspiracy.

Sri Lanka-born Mr Rajaratnam, founder of the Galleon Group, could face jail for up to 20 years. He has posted a $100 million bail bond which is valid till 29th July when the sentence will be announced. He will be fitted with an electronic monitoring device during this period.

The 54-year-old billionaire was convicted by a 12-member federal jury. He sat expressionless as the judge’s deputy read the jury’s verdict in a New York courtroom, PTI reports.

The jury had seven weeks of evidence and closing arguments in the trial, which began in March. The jurors–eight women and four men—reached their unanimous decision on the 12th day of deliberations, convicting Mr Rajaratnam of five counts of conspiracy and nine counts of securities fraud.

Under US federal sentencing rules that are not binding on the judge, Mr Rajaratnam faces between 15-1/2 years and 19-1/2 years in prison. Securities fraud and conspiracy carry a combined maximum penalty of 25 years imprisonment.

The prosecution accused Mr Rajaratnam of making $63.8 million through a web of highly-placed insiders to leak valuable corporate secrets between 2003 and 2009. But the defence argued that he traded on a “mosaic” of public information.

The government’s unprecedented use of extensive phone tapping in an insider trading case, which is more often deployed in organised crime and drug trafficking probes, may have marked a turning point in the prosecution of white collar crimes.

A total of 21 people have pleaded guilty in this insider trading case. Mr Rajaratnam, who was arrested in 2009, denied wrongdoing. He is expected to appeal the decision.

Over the course of the two-month trial, the conversations of Mr Rajaratnam and his friends and business associates were heard over courtroom loudspeakers from 46 digital audio recordings at the heart of the government’s case.

In these calls and from testimony, the jury learned how Mr Rajaratnam called from his mobile phone even when on holiday on a beach in Miami, or in Europe, to make arrangements to deposit money into accounts for friends who had provided him tips.

The friends and associates included Rajiv Goel, a former executive at Intel Corp, Rajat Gupta, who was once head of management consultancy McKinsey & Co and a former Goldman Sachs Group board member, and Anil Kumar, a former director of McKinsey & Co. They have pleaded guilty and testified against Mr Rajaratnam.

Mr Gupta, 62, faces civil charge by the US Securities and Exchange Commission for allegedly passing insider tips. Mr Gupta’s involvement as an unindicted co-conspirator prompted the government to make the unusual move of calling Lloyd Blankfein, CEO of Goldman Sachs, to testify at the trial. Mr Blankfein said that Mr Gupta had broken the firm’s confidentiality policy in his conversations with Mr Rajaratnam.

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COMMENTS

Gaurang Shah

6 years ago

When do you think something like this happening in India?

9% economic growth unlikely this fiscal, inflation to moderate: FM

Addressing senior officials of Indian Foreign Service, finance minister Pranab Mukherjee said major emerging market economies are experiencing robust growth though surge in capital inflows and inflation, especially through hardening of global commodity prices, is a cause of worry

New Delhi: Finance minister Pranab Mukherjee on Wednesday said India will not be able to achieve the targeted growth rate of 9% this fiscal due to volatility in global commodity prices, but expressed confidence that inflation will moderate to 7%-7.5% in the coming months, reports PTI.

“Due to volatility in international commodity prices and other supply constraints, it may not be possible to achieve the growth rate of 9% (+/-0.25%) for the current financial year,” Mr Mukherjee said while addressing the probationers of Indian Economic Service (IES) here.

Inflation, however, would moderate to 7%-7.5% from about 9% now, he added.

The Indian economy grew by 8.6% during 2010-11.

Addressing senior officials of Indian Foreign Service separately, Mr Mukherjee said major emerging market economies are experiencing robust growth though surge in capital inflows and inflation, especially through hardening of global commodity prices, is a cause of worry.

Headline inflation, as measured by the wholesale price index (WPI), for March stood at 8.98%, while food inflation was at 8.76% for the week ended 16th April.

The Reserve Bank of India (RBI) has been trying to bring down inflation by increasing its repo (lending) and reverse repo (borrowing) rates. It increased these rates again early this month, the ninth time since March 2010, by 50 basis points at its annual credit policy.

According to Mr Mukherjee, one of the major challenges faced by India is to “achieve sustained GDP (Gross Domestic Product) growth at the rate of 9% to 10% with fiscal prudence and moderate inflation”.

High growth, he said, was also essential to raise resources for funding social sector schemes like MGNREGA, Right to Education and the proposed Right to Food Act.

Mr Mukherjee said, in the case of Europe, there are still some concerns, with Greece, followed by Ireland and now Portugal, seeking help from the European Union and the International Monetary Fund (IMF).

There may be other countries in the European Union that may face sovereign debt problems, Mr Mukherjee said, adding there are some concerns on the strength of the post-crisis revival in these economies.

Mr Mukherjee said leaders of the G-20 countries have been discussing global financial instability and the resulting economic slowdown.

“...We are engaged in finding ways to ensure better macroeconomic coordination, regulation of markets, strengthening of the monitoring and response mechanisms and promoting growth in a sustainable manner,” he added.

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‘Education, healthcare expansion to spur strong real estate growth in India in next 10 years’

Experts believe that the real estate and infrastructure sectors will benefit from higher economic growth in the country. But there is a case for caution in the short-term

Two little-talked about sectors, education and healthcare, will significantly boost the growth of real estate in India in the current decade, according to Jones Lang LaSalle, the global real estate consultancy. Anuj Puri, chairman and country head, Jones Lang LaSalle India, says these generally "invisible sectors" will contribute largely to the growth of the real estate business.

The real estate business is passing through a particularly difficult phase, hemmed in by increasing costs and sharply rising housing loan rates that has resulted in considerably slower sales.

Mr Puri points out that the education industry, which is likely to cross $70 billion by 2015, will require an additional 16 million square feet in the next four years. Similarly, the healthcare sector is expected to nearly double in value from the current $144 billion to $280 billion by 2020.

"Over 150 hospitals are scheduled to open their doors over the next four years alone, and this will by itself account for approximately 22.5 million square feet of healthcare-related real estate," Mr Puri says.

This optimistic view is in line with the global observation by the real estate consultancy of a strong rise of the BRICS group of emerging markets. It says, these countries accounted for 13% of global investment volumes in the first quarter of 2011, compared to just 2% in 2007.

In the case of India, this is backed by a positive economic outlook. "Despite the continuing turbulence and uncertainty in other parts of the globe, two economies-India and China-will continue to grow at an annual rate of 8%-10%. In fact, by 2020 India will become the 3rd largest economy after China and the US," Mr Puri says. Realty and infrastructure sectors should leverage on this growth, attracting significant investments.

However, there are others who are cautious. "The talk about India being a superpower next to the US or China has been around for quite long," said an analyst. "Nothing of that has happened yet. And real estate being an extremely volatile market, it is difficult to predict how it will behave in the next ten years. The world over, there are people who feel that a realty crisis is deepening. We must be prepared for anything."

In April, the Asian Development Bank said that the realty sector in India would see a U-shaped trajectory, with a lull in 2011, followed by a surge soon after. India's investment-grade real estate was valued at more than $100 billion at the end of 2010-a level that has been achieved only by China.

According to Jones Lang LaSalle, information technology, which has been one of the faster growing sectors, is also expected to continue to generate demand for office space.

"By 2020, the current size of the IT/ITeS market in India will have grown from the current $67 billion to $225 billion. Simultaneously, the markets for hardware and electronics will increase from the existing $45 billion to $400 billion," Mr Puri says.  It is estimated that the demand for commercial properties in the country has already doubled from a low of 20 million square feet to 40 million in 2011, and this is likely to go up to 45 million square feet by 2012.

The other big demand generator would be the retail sector, which is brimming with hope after the government started to allow more FDI in major cities. The retail sector, worth $500 billion today, is forecast to grow to $900 billion by 2020. Organised retail, which constitutes a measly 5% of this pie, is also showing healthy growth.

"Demand for retail real estate rose from 4 million square feet in 2010 to 11 million square feet in 2011. If we factor in the spiralling aspirations of Indian shoppers, the constant development of new residential catchments, townships and satellite cities, the real estate demand from Indian retail by 2020 can well be imagined," Mr Puri says.

He is also optimistic about residential space and hospitality industry, which always feature in the radar of realty sector analysts in a big way. The ministry of housing has estimated a shortfall of 26 million residential units by 2012. The travel and tourism market in India is expected to grow from the $144 billion in 2010 to $431 billion by 2020. In the next four years alone, the branded hotel industry will likely see an addition of 60,426 rooms.

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