Rajaratnam To Be Deposed In Tax Case

May 7 2012 | 2:48pm ET

A tax dispute more than a decade old may not be quite so important to Raj Rajaratnam as it was in 2005, but the imprisoned insider-trader will be forced to talk about it as the legal battle he began that year continues to progress through the courts.

A New York State judge has ordered the Galleon Group founder, who is serving 11 years in prison, to be deposed in a tax case. Rajaratnam and another Galleon partner sued Diversified Group in 2005 over a tax strategy the merchant bank marketed; Rajaratnam said the tax-shelter strategy used in 1999 and 2000 led to more than $35 million in underpaid taxes and penalties. In 2008, an arbitrator awarded Rajaratnam and his partner $5.4 million.

Now, Diversified is suing Rajaratnam and his partner's tax advisers. And one of those advisers objected to the use of Rajaratnam's two days of testimony given as part of the 2005 case because they were not present at the deposition.

It is unclear how much lawyers will be able to get from Rajaratnam, who is appealing his conviction and sentence. A lawyer for the Galleon founder, Samidh Guha, said at the March court hearing that his client might assert his Fifth Amendment right against self-incrimination, given that matters other than the tax dispute could be raised by lawyers at the deposition. "It is a more complicated nature" than the earlier deposition, Guha said.

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