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Case Study: Insider Trading at the Galleon Group

Sheree Starkey

West Georgia Technical College

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Summary

According to Samuel Clowes Huneke, in October 2009, the Justice Department charged

Raj Rajaratnam, a New York hedge fund manager, with fourteen counts of securities fraud and

conspiracy. Rajaratnam, who was found guilty on all fourteen counts on May 11, 2011, had

allegedly cultivated a network of executives at, among others, Intel, McKinsey, IBM, and

Goldman Sachs. These insiders provided him with material non-public information. Preet

Bharara, the governments attorney, argued in the case that Raj Rajaratnam had made

approximately $60 million in illicit profits from inside information. Rajaratnams conviction in

fact falls into a larger post-recession crackdown on insider trading undertaken by the SEC and

the United States Justice Department, led by Preet Bharara. (Huneke, n.d.)

Raj Rajaratnam was the 35th person to be convicted of insider trading of 47 people

charged since 2010. This effort to prosecute insider trading has been marked by more aggressive

tactics such as wiretapping to prosecute insider-trading cases, which might otherwise be difficult

to prove. (Huneke, n.d.)

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Case Study: Insider Trading at the Galleon Group

According to Abs Johnson, information gathering techniques similar to Rajaratnam's are

common on Wall Street. Everyone is in business to make money. Insider trading is illegal, but

sometimes people allow themselves to get so wrapped up in the idea of making money that they

lose sight of what is right and what is wrong. There will be a continuous problem with insider

trading, but people are just going to think of more clever ways to hide it and get away with it.

When it comes to preventing or reducing this type of practice, it is hard to tell what the investors,

regulators and executive could do. The only thing people could do is keep a very close eye on

companies who appear to be using this type of information gathering (ie. Making sudden

changes or decisions about stock, bringing abnormally large amounts of money in, etc.). Also, it

should be very important for employees and whoever else is involved with the company to know

the serious ramifications of engaging in an act such as insider-trading.

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References

Last Name, F. M. (Year). Article Title. Journal Title, Pages From - To.

Last Name, F. M. (Year). Book Title. City Name: Publisher Name.

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Tables

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