Raj Rajaratnam sentenced to 11 years for hedge-fund insider trading scheme

Galleon Group LLC’s Raj Rajaratnam is sentenced to 11 years on Thursday for masterminding the biggest hedge-fund insider trading scheme in U.S. history, that stretched from Silicon Valley to Wall Street.

U.S. District Judge Richard Holwell in Manhattan presided over the jury trial in which Rajaratnam was convicted of 14 counts of securities fraud and conspiracy. It was the stiffest sentence ever given for trading in the stock market using confidential corporate information.

The longest insider-trading sentence before Galleon was 10 years, given to former Credit Suisse Group AG banker Hafiz Muhammad Zubair Naseem, who was convicted in 2008 of leading a $7.8 million scheme.

Sri Lankan born Rajaratnam's rapid flight to billionaire hedge fund chief was undone with the arrest of a former Atherton resident who became a federal informant.

The informant, Roomy Khan, had been caught faxing confidential information to Galleon in 1998 when she worked at Intel. She pleaded guilty in 2002. Caught again in 2007, Khan agreed to cooperate in an investigation of Galleon. 

Rajaratnam, 54, was at the center of a seven- year conspiracy to trade on inside information from corporate executives, bankers, consultants, traders and directors of public companies.

He is fined $10 million and was also ordered to forfeit $53.8 million in illegal profits by the U.S. District Judge Richard J. Holwell, his "crimes and the scope of his crimes reflect a virus in our business culture that needs to be eradicated." Said Howell.

In court papers, the government urged Holwell to make an example of Rajaratnam, saying he "represents the worst of illegal insider trading." Prosecutors compared him to Enron Corp.'s Jeffrey Skilling and WorldCom Inc.'s Bernard Ebbers, convicted in what prosecutors called "the worst of accounting frauds," and Bernard Madoff, the man behind history's biggest Ponzi scheme.

Rajaratnam's lawyer has asked for leniency based on medical conditions he said would be life-threatening if he's sent to prison.

Also caught up in the case Danielle Chiesi, the former beauty queen turned stock trader sentenced to two-and-a-half years in jail for her role in the biggest insider-dealing case in decades. She pleaded guilty to three counts of conspiracy to commit securities fraud arising from an insider trading scheme.

Chiesi, 45, was the former confidante of hedge fund billionaire Raj Rajaratnam, founder of the Galleon hedge fund.

Alan Kaufman, her lawyer, argued that Chiesi, said she was the victim of a "toxic" sexual relationship with Mark Kurland, her former boss and lover at trader New Castle Partners.

Chiesi was the 10th person to be sentenced after an insider-dealing investigation that has secured 46 guilty pleas and convictions.

The investigation caught many prominent valley figures. Among them were Anil Kumar, of Saratoga, a McKinsey & Co. executive who gave Rajaratnam a tip about an Advanced Micro Devices acquisition; Rajiv Goel, of Los Altos, an Intel executive who furnished advance word on Intel's earnings and an acquisition of broadband company Clearwire; and Ali Harari, of San Jose, an Atheros Communications executive who was accused of divulging confidential information. Richard Choo-Beng Lee and Ali Far, who ran the short-lived Spherix hedge fund in San Jose.

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Asia stocks mixed amid uncertainty in Japan, Libya

(AP) BANGKOK –  Stocks in Asia were mixed following a retreat on Wall Street on Wednesday, as the staggering toll exacted by Japan's worst-ever earthquake came into sharper focus and uncertainties grew about the outcome of Western military action against Libya.

Japan's Nikkei 225 slid 1.2 percent in early trading to 9,496.21 after a strong day of gains after a newspaper reported that government estimates of damages from the catastrophic March 11 earthquake and tsunami that devastated Japan's industrial northeast could exceed $300 billion.

The disaster also triggered a crisis at a nuclear power plant that forced the evacuation of tens of thousands of people and forced power cuts due to the shutdown of 11 of Japan's 54 nuclear power plants.

Three of the country's biggest brands — Toyota Motor Corp., Honda Motor Co. and Sony Corp. — put off a return to normal production due to shortages of parts and raw materials because of earthquake damage to factories in affected areas.

Toyota and Honda said they would extend a shutdown of auto production in Japan that already is in its second week, while Sony said it was suspending some manufacturing of popular consumer electronics such as digital cameras and TVs. The production slowdowns hit their stock prices: Toyota drooped 1.5 percent; Honda was down 1.4 percent, and Sony lost 0.8 percent.

Elsewhere, South Korea's Kospi index was up 0.1 percent to 2,016.35, while Hong Kong's Hang Seng index dropped 0.3 percent to 22,798.01.

Meanwhile, investors had a separate worry: the crisis in Libya and the real possibility that Moammar Gadhafi could stave off military action by Western powers intended to keep Gadhafi from overwhelming rebel forces trying to end his four-decade rule.

Oil prices hovered near $105 a barrel Wednesday in Asia as violent uprisings in the Middle East kept traders nervous about possible crude supply disruptions. OPEC-member Libya, which produces enough oil to meet nearly 2 percent of world demand, has almost totally stopped shipping it.

On Wall Street, stocks edged lower Tuesday, ending a three-day rally that had lifted the Dow Jones industrial average above 12,000 for the first time since an earthquake hit Japan more than a week ago.

The Dow Jones industrial average fell 17.90 points to close at 12,018.63. The Standard & Poor's 500 index fell 4.61, or 0.4 percent, to 1,293.77. The Nasdaq composite index fell 8.22, or 0.3 percent, to 2,683.87

In currencies, the euro dropped to $1.4169 from $1.4207 late Tuesday in New York. The yen was unchanged against the greenback at 80.90.

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