Rajaratnam slapped with $92 million penalty in insider trading

Judge Jed Rakoff of the US district court for the Southern District of New York entered his final judgement on Tuesday finding Sri Lankan hedge fund founder Raj Rajaratnam liable for a civil monetary penalty of over $92 million, the largest penalty ever assessed against an individual in an insider trading case of Securities and Exchange Commission

New York: A US judge has ordered disgraced billionaire Raj Rajaratnam to pay over $92 million as penalty in the insider trading case filed against him by the US financial regulator, saying the “huge and brazen nature” of his fraud “cries out” for such an unprecedented fine, reports PTI.

Judge Jed Rakoff of the US district court for the Southern District of New York entered his final judgement on Tuesday finding Mr Rajaratnam liable for a civil monetary penalty of $92,805,705, the largest penalty ever assessed against an individual in an insider trading case of Securities and Exchange Commission (SEC).

In the criminal case against Mr Rajaratnam, the Sri Lankan hedge fund founder was ordered to pay more than $53.8 million in forfeiture of illicit gains and $10 million in criminal fines.

The total amount of monetary sanctions imposed on Mr Rajaratnam in the civil and criminal cases now stands at more than $156.6 million.

In imposing the fine, judge Rakoff said such a severe civil penalty will bring home the message that insider trading should be “a money-losing proposition” for anyone who plans to engage in it.

He said the penalty is further justified given Mr Rajaratnam’s networth which “considerably exceeds” the penalties in the criminal case.

“When to this is added the huge and brazen nature of Mr Rajaratnam’s insider trading scheme, which, even by his own estimate, netted tens of millions of dollars and continued for years, this case cries out for the kind of civil penalty that will deprive this defendant of a material part of his fortune,” judge Rakoff said in his judgement.

Mr Rajaratnam, described by prosecutors as the “modern face of insider trading”, was sentenced to 11 years in prison last month for his role in the massive insider trading scheme, in which he made millions of dollars in illegal profits through inside information passed on to him, including by Indian American Wall Street tycoon Rajat Gupta.

Federal prosecutors and the SEC have also charged Mr Gupta with securities fraud.

Mr Gupta, accused of illegally tipping Mr Rajaratnam while serving on the boards of Goldman Sachs and Procter and Gamble, will face trial next year.

The SEC had brought civil charges against Mr Rajaratnam in October 2009, alleging that he and several others including his New York-based hedge fund advisory firm Galleon engaged in a massive insider trading scheme.

“The penalty imposed on Wednesday reflects the historic proportions of Raj Rajaratnam’s illegal conduct and its impact on the integrity of our markets,” director of the SEC’s Division of Enforcement Robert Khuzami said.

The SEC’s action against Mr Rajaratnam and Galleon was part of a larger insider trading probe that has resulted in civil charges against a total of 29 individuals and entities including hedge fund advisers, Wall Street professionals, and corporate insiders.

The SEC also filed new insider trading charges against Mr Rajaratnam alleging that he caused various Galleon funds to trade based on Mr Gupta’s inside information, generating illicit profits and avoiding losses of more than $23 million.

This insider trading action against Mr Rajaratnam remains pending before judge Rakoff.


Look out, Mr Antony, Little Brother is watching you

One of the biggest-ever defence contract for 126 fighter jets worth a huge $11 billion will be closely watched for any signs of corruption in the deal. Mr Antony and Dr Manmohan Singh and Sonia Gandhi better watch out as at the first sign of corruption, the whistles will be out and blowing loudly across the land

India is finalising one of the country’s biggest-ever defence contracts. The order is for 126 fighter jets worth an immense $11 billion. These jets are meant to replace the country’s ageing fleet of MiG 21s, which make up one-third of the Indian Air Force’s jet fighters which have been crashing regularly for no other reason but that they are aged.

Originally six companies and consortia put in bids for the tenders which were announced in early 2011. The six were: Dassault of France which is offering its Rafale jet fighter; a consortium of the pan-European EADS, BAE Systems of the UK and Finmeccania of Italy. This grouping is offering the plane called the Eurofighter Typhoon; Lockheed Martin of the US bid with its F-16 fighter aircraft; Boeing of the US which placed on the table its bid to supply the F-18 Super Hornet; Saab of Sweden offered its Gripen fighter and Russia which wanted to sell its MiG 35.

India made a shortlist of two in April this year: Dassault’s Rafale and the Eurofighter Typhoon of the pan-European consortium. The bids for the shortlisted two fighters were opened last Friday. No details have been released as to what the bids offer.

The defence ministry, it is understood, will evaluate the bids on the basis of three criteria: The cost of acquisition and what is known as the “life-cycle cost of the aircraft” and “military offset considerations.” The last criterion covers the extent of technology transfer and the investment the bidders will put into the country’s defence industries if they are chosen.

According to informed sources, the two US companies lost out because they did not offer their latest and technologically most advanced jet fighters. The controls imposed by the US government on transfer of technology to India also came in the way of these two companies.

India’s jet fighter order is stated to be of vital importance to the shortlisted bidders. Both are looking for export markets since defence budgets are shrinking in the developed world.

The Eurofighter Typhoon has four main customers: the UK, Germany, Spain and Italy. Austria and Saudi Arabia also operate the jet. But military sources say there are no other firm export orders for the Typhoon at present.

The stakes are said to be higher for the Dassault. The Rafale came out as France’s decision to pull out of the pan-European project with Germany, the UK, Spain and Italy to share the development costs of a new fighter that ultimately became the Typhoon. The Rafale has no customers outside France. Dassault is hoping to sell the Rafale to Brazil and the United Arab Emirates.

All this is fine and till now everything is going by the book. But the future could be worrying. The financial well-being of both the shortlisted bidders depends heavily on securing our order. Therefore, the cynic would be justified in warning that there could be ‘pressures’ a la Bofors on the politicians, bureaucrats and Air Force bigwigs deciding the deal.

And then, $11 billion is a huge, humongous amount of money. When such money changes hands, it is but human nature that some of it will adhere to sticky fingers and become unstuck in a ‘safe’ banking haven in Switzerland or the Cayman Islands or Bermuda.

Luckily, perhaps, we have a supposed incorruptible in AK Antony, the defence minister. And we hope that he will continue to maintain his reputation while dealing with this order.

Still, we at Moneylife and in the huge Indian press as well feel constrained to issue a warning.

We will be watching this deal very closely. We assure Mr Antony and Dr Manmohan Singh and Sonia Gandhi that we will be able to sniff out the first odour of corruption in this deal. The press has its sources of information.

So the trio had better take care. At the first sign of corruption, the whistles will be out and blowing loudly across the land.

(R Vijayaraghavan has been a professional journalist for more than four decades, specialising in finance, business and politics. He conceived and helped to launch Business Line, the financial daily of The Hindu group. He can be contacted at [email protected]).




6 years ago

Well said sir,there must be atleast someone who should look into the defance deals very closely if corruption is taking place thus hampering and risking the countries soverignity.The corruptors should be life sentenced if found guilty.


6 years ago

are you guys serious, this is such an old news on 4th they have opened financial offers too and finance ministry has revised its estimates which is now more than $11bn...and btw the picture used in the article is of F-16's...which are out of the race, you magazine has potential..but it seems you guys are simply not interested ..just doing thing for the sake of doing it....not good...m talking abt attitude..anyway even article is not tat fantastic..just an ordinary one...don't want to break authors heart..defence is different from politics, finance and business u c...


6 years ago

are you guys serious, this is such an old news on 4th they have opened financial offers too and finance ministry has revised its estimates which is now more than $11bn...and btw the picture used in the article is of F-16's...which are out of the race, you magazine has potential..but it seems you guys are simply not interested ..just doing thing for the sake of doing it....not good...m talking abt attitude..anyway even article is not tat fantastic..just an ordinary one...don't want to break authors heart..defence is different from politics, finance and business u c...


6 years ago

Though the article is more on corruption, the information is very benign in regard to the MMRCA deal. Most of the topics lack details, and information also is little away from facts.

Is it possible to curtail killings of RTI activists? Yes, only if the government wishes so

Yet again, another RTI activist was brutally murdered. This time it was Ahmedabad-based Nadeem Sayeed. Will this trend soon become a run-of-the-mill crime story or is there hope? The ball is actually in the government's court - all it has to do is enforce Section 4 of RTI Act in right earnest - which mandates suo moto disclosure by all its departments

Ahmedabad-based Nadeem Sayeed is the latest Right to Information (RTI) activist to have been brutally killed in broad daylight. Last year too he was seriously assaulted but continued his campaign to expose bad governance by filing RTIs related to illegal cow slaughterhouses, bad sanitation and asking uncomfortable queries to two police officers and a Bhartiya Janata Party (BJP) leader against whom charge sheet was not filed despite him being declared accused in an extortion case.

Silencing of whistleblowers with knives and guns seems to have become an untoward trend, thanks to culprits roaming free due to pathetic police investigations and government's hollow assurances on giving police protection to RTI activists and bringing in a strong Whistleblowers Protection Law. After Pune-based RTI activist Satish Shetty's murder in January 2010, the state government, prompted by a High Court directive, issued a circular assuring immediate lodging of non-cognisable first information report (FIR) by the police and speedy investigations, besides protection. Read entire circular here: (http://www.box.net/shared/451mngegta).

Recently, speaking at the Central Information Convention in Delhi, Prime Minister Manmohan Singh said, "I would like to mention here our initiative to enact legislation for the protection of Whistleblowers which would further strengthen the Right to Information. We expect this law to be enacted in the next few months and it would, among other things, help in prevention of violence against those who seek to expose wrongdoings in our public administration.''

 However, the irony is that, the government need not look here and there for protecting activists - it is just one step away from ensuring minimum threats to RTI activists as the RTI Act itself has provisions for maximum transparency. The reference is to Section 4 of the RTI Act, which makes it mandatory for every government department to disclose most of its functions. In fact, every 'Public Authority' had to make this information accessible to public within 120 days of the enactment of the RTI Act, which was back in 2005 and regularly update the information thereafter. However, six years down the line, official secrecy is rampant if you consider that most of the 'Public Authorities' have been reticent in updating their websites in providing maximum information about its activities.

So, you may ask, how is this connected to curtailing threats and killings? The reason is simple - citizens invoke RTI to demand transparency in the small and large scale projects that the government undertakes, be in the land deals; in the concessions or grants it gives for various schemes; in the construction of civic utilities like roads, school buildings; in the funds it disburses for various purposes and so on. If all such information is readily available on the websites of the relevant government departments, there would not be any need for citizens and activists to file an RTI application and invoke ire from untoward elements.
Before that, let us see how the vicious circle of revenge and animosity can be brought to a full stop - a way that is not necessarily Utopian. The seed of threats and killings of activists, which hang like a Damocles' Sword is corruption, as commissions, kickbacks, financial irregularities and other scandalous issues surround projects meant for the public which largely funds them through the tax it pays.

If the government sternly enforces Section 4, then the first place of sin - of shady deals, bribes and financial irregularities, the bane of governance today, wherein the nexus of government officers at all levels, elected representatives and contractors that is all too well-known would be minimized. This is because both the lower and higher bureaucracy would be made accountable for their line of action as most of the information would be available in the public domain. Already, government officers are wary of the RTI Act. One of the senior police officers confessed sometime back to me that, “Earlier I used to casually put in remarks on files (called file noting which come under RTI Act) but now I am very careful as people have access to this information too.'' Hence, transparency can trigger off the need to come clean while executing projects and deals by the public authorities.

So, all that the government need to do is find ways by which strong directives to every department (which it can issue again at the backdrop of killings of RTI activists) to abide by Section 4 would be sternly enforced. This would compel government departments to put up information in the public domain made mandatory by Section 4 of the RTI Act. This would in turn make information accessible to the public at the click of the mouse. Result? More than 70% or more of RTI applications would be reduced, say experts. More importantly, threats and killings would slowly but steadily become redundant.

Under Section 4, every government department or Public Authority as it is termed in the RTI Act, is required to put up the following information, on its websites. This would reveal the extent of transparency that is mandatory on the part of the government and why uploading of such information from time to time would drastically reduce the number of RTI applications and also threats and killings of activists:

  •  Maintain all its records duly catalogued and indexed in a manner and the form which facilitates the right to information under this Act and ensure that all records that are appropriate to be computerised are, within a reasonable time and subject to availability of resources, computerised and connected through a network all over the country on different systems so that access to such records is facilitated;
  •  Publish within one hundred and twenty days from the enactment of this Act,

1.    The particulars of its organisation, functions and duties;

2.    The powers and duties of its officers and employees;

3.    The procedure followed in the decision making process, including channels of supervision and accountability;

4.    The norms set by it for the discharge of its functions;

5.    The rules, regulations, instructions, manuals and records, held by it or under its control or used by its employees for discharging its functions;

6.    A statement of the categories of documents that are held by it or under its control;

7.    The particulars of any arrangement that exists for consultation with, or representation by, the members of the public in relation to the formulation of its policy or implementation thereof;

8.    A statement of the boards, councils, committees and other bodies consisting of two or more persons constituted as its part or for the purpose of its advice, and as to whether meetings of those boards, councils, committees and other bodies are open to the public, or the minutes of such meetings are accessible for public;

9.    A directory of its officers and employees;

10.    The monthly remuneration received by each of its officers and employees, including the system of compensation as provided in its regulations;

11.    The budget allocated to each of its agency, indicating the particulars of all plans, proposed expenditures and reports on disbursements made;

12.    The manner of execution of subsidy programmes, including the amounts allocated and the details of beneficiaries of such programmes;

13.    Particulars of recipients of concessions, permits or authorisations granted by it;

14.    Details in respect of the information, available to or held by it, reduced in an electronic form;

15.    The particulars of facilities available to citizens for obtaining information, including the working hours of a library or reading room, if maintained for public use;

16.    The names, designations and other particulars of the Public Information Officers;

17.    Such other information as may be prescribed and thereafter update these publications every year;

  •  Publish all relevant facts while formulating important policies or announcing the decisions which affect public;
  •  Provide reasons for its administrative or quasi-judicial decisions to affected persons.

1.    It shall be a constant endeavour of every public authority to take steps in accordance with the requirements of clause (b) of sub-section (1) to provide as much information suo motu to the public at regular intervals through various means of communications, including internet, so that the public have minimum resort to the use of this Act to obtain information.

2.    For the purposes of sub-section (1), every information shall be disseminated widely and in such form and manner which is easily accessible to the public.

3.    All materials shall be disseminated taking into consideration the cost effectiveness, local language and the most effective method of communication in that local area and the information should be easily accessible, to the extent possible in electronic format with the Central Public Information Officer or State Public Information Officer, as the case may be, available free or at such cost of the medium or the print cost price as may be prescribed.

Explanation For the purposes of sub-sections (3) and (4), "disseminated" means making known or communicated the information to the public through notice boards, newspapers, public announcements, media broadcasts, the internet or any other means, including inspection of offices of any public authority.   

Need we explain more? The question is: why is the government silent on this action? From time to time several Information Commissioners have been giving stern orders to abide by Section 4 to government departments when they receive complaints from RTI applicants. They have also been sending circulars to these departments to be transparent as per Section 4. However, if the government has the will and cares for the protection of whistleblowers, it can issue such a directive within a day.



S H Subrahmanian

6 years ago

Well said. Our PM is only interested in filing cases against well meaning Team Anna and even trying to find a way out by chasing Kudankuam protestors! No strong Lokpal bill. Much, if not all, information must come voluntarily in the websites. Our job is just remain alert! Even PPP and all the exempted bodies should come under the ambit.
Will it happen? Well, it's Bharat!

Anand Sharma

6 years ago

Seems like the government is repenting on why it even implemented the RTI. Now they do not want to touch it or implement anything else related to RTI, lest it puts them into more trouble :-(

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