Wednesday, 22 March 2017
Last updated 21 hours ago
Jul 2 2014 | 8:58am ET
The ever-shrinking insider-trading case against Galleon Group founder Raj Rajaratnam’s brother got even smaller yesterday—and may soon disappear altogether.
U.S. District Judge Naomi Reice Buchwald threw out two of the remaining three charges against Rengan Rajaratnam after prosecutors rested their case. The judge found that the government had failed to present sufficient evidence that the younger Rajaratnam illegally traded shares of Clearwire Corp. in 2008.
“After considering the evidence in the light most favorable to the prosecution, can a reasonable jury find that Rengan traded on inside information?” Buchwald said. “A reasonable jury could not.”
Buchwald said that there was no evidence that Rengan Rajaratnam knew that his brother’s tipsters were receiving a benefit for their information, a critical requirement to sustain an insider-trading charge. She also noted that the brothers often made opposite trades.
“You have no direct evidence of Raj passing inside information to Rengan,” Buchwald said.
The only charge that still stands is a conspiracy allegation. Buchwald said she would rule today on whether to throw that count out as well—and with it the entire case. The judge said her “current thinking” is to allow the allegation to go before the jury.
If the case is not dismissed entirely, Rajaratnam’s defense team will begin their case today. Prosecutors cannot appeal Buchwald’s decision.
The dismissal of the two fraud counts means that Rengan faces a maximum of five years in prison if convicted. Under the original indictment’s seven charges, he could have gone to jail for decades.
His brother is serving an 11-year sentence.