Raj Rajaratnam

For other uses, see Rajaratnam.

Rajakumaran Rajaratnam Rajakumaran Rajaratnam (born June 15, 1957) is a Sri Lankan-American author, philanthropist and former hedge fund manager and founder of the Galleon Group, a New York based hedge fund management firm.

Raj Rajaratnam
Raj Rajaratnam in 2024
Born	Rajakumaran Rajaratnam (1957-06-15) June 15, 1957 Colombo, Sri Lanka
Citizenship	American
Alma mater	University of Sussex University of Pennsylvania
Occupation	Hedge fund manager
Relatives	J. M. Rajaratnam (father) Rajeswari Muttucumaru (mother) Rengan Rajaratnam (brother) Rajakanthan Rajaratnam (brother) Shanthini Rajaratnam (sister) Vathani Rajaratnam (sister)

In 2007, Rajaratnam was listed on the Forbes 400 List as the 236th richest person in America, with an estimated total net worth of US$1.5 billion.

In tandem with his success as an investment professional, Rajaratnam developed an early and proven commitment to philanthropy, with significant and consistent contributions both in the United States, as well as in Sri Lanka.  The overarching theme to Rajaratnam’s giving remains income and employment generation as a specific means to achieving economic independence.  He is most passionate about his charitable efforts in his motherland because of the lack of economic progress and social development as a result of the civil conflict which buffeted the island for almost three full decades between July 1983 and May 2009.

On Friday, October 16, 2009, Raj Rajaratnam was arrested by the FBI for alleged insider trading.  The ensuing media frenzy -- from the moment of his arrest straight through to the moment of his conviction at the end of his trial in May 2011 and incarceration in December 2011 -- was highly coordinated and global.  U.S. Attorney Preet Bharara proclaimed that the overall profits from the alleged insider trading represented a personal gain of over US$60 million without disclosing the actual reality:  The trades in question represented a mere 0.001% of Galleon’s total trades for the time  period and that when the gains/losses of the trades in question were netted,  the result was an overall loss of approximately US$25 million, not a gain of US$60 million.  Bharara conducted multiple press conferences frequently for well over a year, all the while aggrandizing himself.

In 2014, four years later, the Appeals Court not only overturned Bharara’s interpretation of insider trading, but also criticized the "doctorine novelty" of Bharara’s approach. They rebuked Bharara of making up his own rules as he went along. Bharara was subsequently fired as the US Attorney for the Second Circuit in New York. Rajaratnam, on the other hand, was released early.

Rajaratnam published his memoir, Uneven Justice: The Plot to Sink Galleon, in December 2021 detailing the events surrounding his insider trading conviction and the prosecutorial overreach which defined every aspect of the process. Rajaratnam launched his book, Uneven Justice in English (December 2021) and Tamil (January 2024).

Today, Rajaratnam runs a family office which invests in venture capital, public equity, private equity, and real estate, each with a focus on the US markets. Rajaratnam is also a guest lecturer to final-year law students at universities on both the East and West Coasts of the United States.

Raj Rajaratnam is seen during the release of the Tamil version of the book Uneven Justice with Jaffna Teaching Hospital Director Dr. Thangamuthu Sathiyamoorthy (right) and Fintech Association of Sri Lanka President Rajkumar Kanagasingam (left) on January 20, 2024 at the Hoover Auditorium, Faculty of Medicine, University of Jaffna.

Early life

Rajaratnam was born in Colombo, Sri Lanka to J. M. and Rajeshwari Rajaratnam.  His mother was a homemaker. His father earned his Chartered Accountancy in London and was later named the Chairman and CEO of Singer & Co in Sri Lanka in 1970.  Later he was named the Vice President of the Asia Region of the Singer Company. With a father on a meteoric professional trajectory, the younger Rajaratnam established his own excellence in academics and sports as a youth and young adult.

Rajaratnam began his studies at S. Thomas' Preparatory School, Kollupitiya, but was soon enrolled as an 11-year-old at boarding school in India. Subsequently, Rajaratnam left India and moved instead to a boarding school at Dulwich College in London^. Having completed Advanced Level Examinations, he went on to study engineering at the University of Sussex. Rajaratnam moved to the United States where he was accepted to the University of Pennsylvania’s Wharton School of Business.  In 1983, three years later, he earned an MBA and was inducted into Beta Gamma Sigma, a prestigious business honour society.

Career

Rajaratnam started his career as a lending officer at Chase Manhattan Bank where he specialized in business loans to technology companies.  In 1985, he joined the investment banking firm Needham & Co. as an equity research analyst focused on the Technology sector. He rose rapidly through the ranks.  In 1987, he became the Head of Research.  In 1992, at the age of 35, Rajaratnam was named President.  During this time, he received a commendation from George Needham, who stated that Rajaratnam is “the finest Research Analyst I’ve ever known.” In March 1992, Rajaratnam started a hedge fund, the Needham Emerging Growth Partnership, which he later bought and renamed the Galleon Group.

At its height, the Galleon Group managed assets of well over US$7 billion with offices in New York, Singapore, Taiwan, London, and California.  Rajaratnam was featured to be among the handful of elite US money managers in a book called The New Investment Superstars. Galleon followed a bottoms-up, fundamental approach to its analysis with 35 equity analysts globally covering Technology, Healthcare, Consumer Retail, Energy, and Financial sectors.

Contributions to charitable and political organizations

Rajaratnam cites his father’s commitment to charitable giving as his inspiration for looking at the world, not through the lens of financial austerity, but rather through the lens of financial gratitude. J.M. Rajaratnam’s gift to his children was education all the way through to graduate degrees. When he died, he made no secret of the fact that his will would stipulate the distribution of his estate to people whose needs were far greater than his. The teachings were not lost on the younger Rajaratnam who began early in his professional career to make a difference in the lives of many through the wealth he was building.

For example, Rajaratnam spent Christmas 2004 on the beaches of Southeastern Sri Lanka. The Tsunami of 2004 hit Sri Lanka the next day, on the morning of Boxing Day, leaving almost 40,000 Sri Lankans dead and over 100,000 without homes. Shocked by the devastation that destroyed entire coastlines, he donated US$12 million to building houses in the South, East, and North of Sri Lanka (US$8.5 million to the South and East; US$3.5 million to the North through the TRO, the only way to contribute to the North and with the government’s blessing).  These proceeds resulted in the construction of hundreds of new homes around the island, irrespective of whether they were for Tamils, Sinhalese, or Muslims.

Rajaratnam alongside other private donors, partnered with the US State Department to fund mine detection dogs for demining war-affected areas in Sri Lanka. He recalled his visits to the mine-impacted areas of Sri Lanka each of which underscored the devastation and humanitarian toll that land mines took, especially in the north of the country. Recalling his encounter with a young child in Kilinochchi who had lost both legs to a land mine, a painful image that remains etched into his memory, Rajaratnam said these encounters "made it an easy decision to write the check."

The Sri Lankan Justice Ministry has acknowledged and thanked Rajaratnam for the millions of dollars contributed to rehabilitating child soldiers conscripted by the LTTE.

Rajaratnam is also a contributor to various charitable causes that promotes development in the Indian subcontinent (India, Pakistan, and Sri Lanka).  In addition, Rajaratnam has supported charities in the New York metropolitan area focused on young people from low-income families including South Asian and African American youth.  For many years, Rajaratnam was on the Board of the Harlem Children’s Zone and his wife Asha was on the Board of the South Asian Youth Association of New York.  

Conviction and imprisonment for insider trading

Additional context at Raj Rajaratnam, Galleon Group, Anil Kumar, and Rajat Gupta insider trading cases

On Friday October 16, 2009, Raj Rajaratnam was arrested by the FBI for insider trading in the stock of several publicly traded companies. U.S. Attorney Preet Bharara put the total profits in the scheme at over $60 million, telling a news conference that it was the largest hedge fund insider trading case in United States history. Jim Walden, an attorney for Rajaratnam, said his client is innocent and would fight the insider-trading charges.

Rajaratnam was accused of profiting from information received from the individuals listed below:

• Robert Moffat, a senior executive of IBM, considered next in line to be CEO.
• Anil Kumar, a senior executive of McKinsey & Company, and close friend of Rajat Gupta (its former managing director) who was later also convicted of passing information to Rajaratnam.
• Rajiv Goel, a midlevel Intel Capital executive.
• Roomy Khan, previously convicted of wire fraud for providing inside information from her employer, Intel, to Rajaratnam.

It was reported that Rajaratnam, Goel, and Kumar were all part of the class of 1983 from Wharton business school.

The Sri Lankan stock market fell sharply after Rajaratnam was arrested on insider trading charges in October 2009. Sri Lanka's Securities and Exchange Commission is reviewing the active stock trading of Raj Rajaratnam with a view of identifying any insider trading.

Rajaratnam was also accused of conspiring to obtain confidential information on the $5 billion purchase by Warren Buffett's Berkshire Hathaway of Goldman Sachs preferred stock prior to the September 2008 public announcement of that transaction. The Wall Street Journal reported that a former member of the board of directors of Goldman Sachs and former McKinsey & Company chief executive Rajat Gupta told Rajaratnam about Berkshire's investment before it became public. Gupta stood to profit as would-be chairman of Galleon International, a co-founder of New Silk Route with Rajaratnam, and as a friend of Rajaratnam. In March 2011 Gupta was charged in an administrative proceeding by the SEC. Gupta maintained his innocence, counter-sued, and won dismissal of the administrative charge, but was then arrested on criminal charges.

Three days before Gupta's arrest, Rajaratnam was reported to have said that the prosecutors had wanted him to wear a wire and tape his conversations with Gupta. "It was Rajaratnam’s understanding that were he to plead guilty and wear a wire, he might be offered a sentence of as little as five years. With good behavior, he could be out in 85 percent of that time," the report continued. Rajaratnam did not — and has not ever, cooperated with federal prosecutors.

On May 11, 2011, Rajaratnam was found guilty on all 14 counts of conspiracy and securities fraud. On October 13, 2011, Rajaratnam was sentenced to 11 years in prison by Judge Richard Holwell. To date, this was the longest prison sentence ever handed out for insider trading. The thirteen other defendants connected to Rajaratnam's case received prison sentences averaging approximately three years each.

Rajaratnam served the first years of his 11-year sentence in Ayer, Massachusetts. His appeal to the United States Court of Appeals for the Second Circuit was argued in October 2012 by Patricia Millett, who subsequently became a federal Court of Appeals judge herself on the United States Court of Appeals for the District of Columbia Circuit on December 10, 2013.

U.S. District Judge Loretta Preska in Manhattan on March 3, 2017, rejected Rajaratnam's bid to void much of his insider trading conviction and shorten his 11-year prison sentence, on account of Rajaratnam failing to show his actual innocence on five of the 14 counts on which he was convicted, or that two other counts should be vacated because the main government witness committed perjury. Preska also "rejected Rajaratnam's argument that his trial counsel was ineffective, and denied Rajaratnam's bid to reduce the $53.8 million that he had agreed to forfeit to about $4.3 million."

Post-prison activities

Today, Rajaratnam runs a family office that is focused on investments in the United States.

Shortly after his release, Rajaratnam received many requests for interviews. He avoided many of these as he was adamant that he was not interested in re-litigating his conviction.  If he were to accept an invitation for an interview, the sole focus of any discussion would be to shine a very bright light on the consequences to defendants of prosecutorial overreach.

In December 2021, Rajaratnam published his memoir, Uneven Justice: The Plot to Sink Galleon detailing the events surrounding his conviction and his criticisms of the US criminal justice system

Rajaratnam appeared on many radio and T.V. talk shows to highlight the irrefutable details of his conviction. All of these details are available in documents in the public domain.  Talking to Andrew Ross Sorkin of Squawk Box on CNBC TV Rajaratnam gracefully highlights and explains the details of strategies employed to achieve his conviction.

See also

• SEC v. Rajaratnam
• Chip Skowron, hedge fund portfolio manager convicted of insider trading
• Mathew Martoma, hedge fund trader and portfolio manager convicted of insider trading