Former colleagues are helping the government’s insider case against hedge fund titan Raj Rajaratnam. They describe an atmosphere where the pressure to get the inside scoop about earnings and major transactions was intense.
Among those who are cooperating witnesses are California hedge-fund managers Ali Far and Choo Beng Lee, the Wall Stret Journal reports, citing “people familiar with the criminal probe.”
Far is a former analyst at Galleon. Lee worked with Mr. Rajaratnam at brokerage firm Needham & Co. as a research analyst in the mid-1990s, prior to the launch ofthe Galleon Group in 1997, and later at SAC Capital. In 2008, the two men formed Spherix Capital, which was shut down earlier this year despite gains of 10% in a rocky market.
Both men were suspected by people at Galleon and other hedge funds of “wearing a wire,” the Journal reports.
The Journal describes Galleon as a place where traders and analysts were expected to get information that could move the markets. “Get an edge or your gone,” is the way one person describes it.
The case seems to hinge on whether Rajaratnam crossed the line in pursuit of this “edge.”
From the Journal:
Those who couldn’t come up with an edge faced pressure even if they were senior executives, though the tension usually didn’t come directly from Mr. Rajaratnam, a native of Sri Lanka who rose to prominence in the late 1980s as a semiconductor analyst at investment-banking firm Needham & Co.
A senior trader, Leon Shaulov, who wasn’t named in any federal charges, sometimes berated traders or analysts who couldn’t uncover enough information that could move stocks, say several current and former employees. They add that Mr. Shaulov also would sometimes shout with joy when stocks moved the right way. Nearby, Mr. Rajaratnam would listen to the commotion through the glass door to his office. Through Galleon, Mr. Shaulov declined to comment.
People familiar with the matter say one of Mr. Shaulov’s regular targets was Gary Rosenbach, who helped start Galleon with Mr. Rajaratnam. One trader says Mr. Shaulov, in front of the rest of the staff, once turned on Mr. Rosenbach, screaming, “You’re a disease, you’re a jinx.”