The Rise And Fall Of Raj Rajaratnam

rajaratnamRaj Rajaratnam used to be idolized. His life and career are ruined, but he’s considered lucky for only getting 11 years.

Raj Rajaratnam was just sentenced to 11 years in jail and fined $10 million for insider trading.Even though he was sentenced to serve the most years ever for insider trading, prosecutors and many others believed that Raj should go to jail for many more.

“No matter what the sentence,” Raj’s defending lawyer said, arguing for the judge’s mercy on Raj because of a degenerative, progressive health condition, “No one running a hedge fund would want to trade places with Raj.”

Three years ago, many would have jumped at the chance. In addition to providing nearly all of the damning evidence, the contentious wiretaps (Raj plans to appeal on the motion of suppressed wiretaps) also gave a look into the life of a billionaire: Raj’s vacations to France, Italy, Miami, and the Caribbean, his dinners at Nobu, Raj jet-setting, eating dinner with important people, getting honored at fancy dinner parties, and much more…

THEN (Summer circa 2000): Raj vacations with his wife and kids in Saratoga Springs

Rajaratnam's family vacationed in Saratoga Springs, where Raj re-connected with his college friend, Anil Kumar.

Saratoga Springs is near Disneyland. Raj and Asha Pabla, his wife (pictured), have 3 children.

Asha did not appear in court once.

NOW: Raj's wife, Asha, only attended court once, on the day of his sentencing. The intense media coverage kept them away.

'His family would like to be here, but he doesn't want them subjected to the media crush,' said Terrence Lynam, Raj's lawyer.

The media crush got so intense on the day of his sentencing that Raj's driver fell to the ground outside in a scuffle with a photographer as he helped Raj enter his black suburban. Punches were thrown.

John Dowd, one of Raj's lawyers who was not at court on the day of sentencing, got into repeated scuffles with aggressive photographers and videographers. He gave a camera the finger one day, another day, he allegedly told one, 'I hate you.'

THEN (2003): Raj gives two women keys to two spanking new BMWs as gifts

NOW: Raj must pay a fine of $10 million

Raj must also pay the U.S. government $1,400.

THEN (December 2004): The Rajaratnam family vacations in Sri Lanka, and the tsunami hits!

In 2004, Raj vacationed with his family in Sri Lanka, Raj's native country. (Raj is said to own over 50% of the Sri Lankan exchange's market cap.)

On December 26th, a tsunami struck Sri Lanka, killing 230,000, the most killed by a tsunami in human history.

His family donated $5 million to tsunami victims.

Source: Bloomberg

NOW: Raj arguably has not gotten to spend quality time with his family in 2 years

And he won't get to for the next 11 years, so he will miss a large portion of his 3 now-young kids' growing up.

Raj attended nearly every trial (except for 1 day) and hearing. They have been going on for the past 2 years, and he has not been allowed to leave the country.

Now he and his family will get to spend just 45 days at the family's home in Manhattan, Sutton Place, before he must submit to jail on November 28.

THEN: April 2007: Raj makes $36 million in 3 days while relaxing in the Caribbean. Then it's off to France.

Between April 13 and 17 2007, Raj was vacationing in the Caribbean.

During his vacation, Raj directed Galleon Tech to reverse its position on Intel. At first, the fund held a short position of ~1,150,000 shares of Intel common stock (worth ~$23.5 million). But then Rajiv Goel, an Intel executive and Raj's friend, heard that Intel would report earnings that were better than expected. So he told his employees to cover its entire short position in Intel common stock and to purchase ~1.72 million shares of Intel common stock (worth ~$36 million).

Later that year, Raj and his family traveled with Rajiv Goel's family to France.

Source: Rajiv Goel's testimony.

THEN (April 2008): Raj hits a Lehman brothers dinner party, then flies to party with Indian billionaires in San Francisco

On April 21, Raj met with Amin Lakhani of the famous Pakistani company, the Lakson Group.

Raj had dinner with Stuart O'Dell, the director of retirement investments for Intel, at a Lehman Brothers conference on April 28th in Orlando, Florida.

The two discussed a strategic partnership. Raj hoped O'Donnell would invest a portion of Intel's pension fund, $100 million, in Galleon.

On April 30 2008, Raj went to the AIF Gala (the American Indian Foundation), where he met with Mukesh Ambani from Reliance Industries.

Held at the Palace Hotel in San Francisco, the theme of the event that year was 'A Passage To India.' Ambani was the keynote speaker at the event. Rajat Gupta, a board member at Goldman Sachs at the time, was also there, as you can see in the photo above (he's on the far left).

From Mukesh, Raj learned that Reliance might be interested in AMD's fab technology.

Source: Transcript #524 and #521R

NOW: The prosecuting team compares Raj To Bernie Madoff and Jeff Skilling

The sentence the prosecuting team wanted, 24 years, is the same as that given to people who commit manslaughter, Lynam argued in court before Judge Holwell delivered Raj's sentence.

Insider trading like Raj's, said the prosecution, 'makes a mockery of the principle that no one has an unfair in the market.'

'It shakes the integrity of financial markets.'

THEN (May 2008): Raj attends a conference in Washington and finds a new investor who has $100 million

NOW: Raj risked a higher sentence just because he plead not guilty

By doing so, he subjected the prosecution to the burden of proving that Raj was guilty. The U.S. court system operates based on principles that punish defendants who plead not guilty.

The sentence is 'manipulated' and 'shortened' when a defendant cooperates with the government, Lynam argued. He said Raj should not be punished because he subjected the prosecution to the burden of proof.

THEN (August 2008): Lunch with a Goldman board member, dinner at Nobu with friends -- just a typical day for billionaire Raj!

On a Friday afternoon August 15, 2008, Raj went to lunch with Rajat Gupta, likely in Greenwich, CT.

'What I figured is that I would leave here around 2:30, after lunch with Rajat,' he told Anil Kumar, with whom he had plans to meet for dinner and drinks, on Friday August 15th.

'And then we would uh, you know, I would drive in and then I'd come to the office for a few minutes and then I walk to Nobu, right?'

Later that evening, he met Anil Kumar for dinner at Nobu.

Source: Transcript #553

NOW: Raj's friends, family and acquaintances sent over 200 letters to court arguing for mercy

The letters, some of which were from third parties, 'describe the real Raj,' said Lynam.

He is 'kind, considerate, and polite.'

'He cares deeply about leaving behind a better world.'

'He truly cares about the causes he champions,' said Lynam.

THEN (September 2008): Raj watches the U.S. Open one day, and flies to Hong Kong the next.

In early September, Raj went to the US Open, where he saw Arun Sarin, the former CEO of Vodafone who had just stepped down in a shocking exit from in June. (Raj's house in Greenwich, CT has tennis courts.)

'I know that Arun was at the tennis, that's all I know, I don't know what the discussions were, you know,' Raj told Anil Kumar, who was trying to figure out Arun's involvement in a Telecom fund that Rajat Gupta and Parag were planning, on September 11th.

The next day, on September 12th, Raj flew to Hong Kong.

From there, he flew to Singapore, where Galleon had an office.

'And then from there I'm back to New York, I think, you know because markets are so crazy.'

Source: Transcript #616

In October, Raj returned to New York 'you know, because markets are so crazy,' as he told his friend, Anil Kumar.

Meanwhile, Kumar was partying with India's richest men in Montauk, NY, where Anand Mahindra has a home.

'I guess it's some suburb or something of New York,' Anil told Raj on the phone in September.

Mahindra is the Vice Chairman and Managing Director of Mahindra & Mahindra (his grandfather founded the company).

Important sidenote: When Rajat Gupta was charged by the SEC with insider trading (passing tips to Raj about Goldman Sachs, which he was on the board of at the time), Mahindra defended him on twitter. Click here to see the tweets >

Mahindra hosted a dinner for 50 at his house to discuss the future of India in October 2008. Mukesh Ambani, of the famous Ambani brothers, was there. He runs Reliance Industries, India's most valuable company. We wouldn't be surprised if Raj eventually got an invite to the dinner party, too. (But the call was minimized during the time the two discussed the party, so we can't be sure.)

Source: Transcript #616

THEN (2008): The Rajaratnam family travels to Europe with the Goels. First they drive around Italy, then it's off to London.

Raj and his family traveled to Europe with Rajiv Goel's family.

Raj had to get an Italian driver's licence so he could drive around Italy. (Rajiv already had his.) So he asked a woman named Anita (who is either his secretary or Rajat Gupta's wife, Anita, or perhaps both) to get him one.

After Italy, Raj and Rajiv went to London.

Source: Transcript #521R, Goel's testimony

THEN (October 2009): Raj impresses a friend, who already idolized him, by bringing him to his amazing condo in Miami, Florida for a vacation just days before he is arrested

Raj brought Anil Kumar to The Setai, where he has a condo in South Beach, Miami, in Florida.

On the beach one afternoon, Raj got a call. He walked down the beach to have a private conversation for about 5 or 10 minutes. When he came back, he was excited.

He told Kumar, I just got a call from a Cisco Systems executive. Cisco is buying a company called Starent.

Later that day, Raj told Kumar he was worried. You know Anil, I'm told that there's a gentleman who used to work for me and he's now wearing a wire. From now on when you call me, you should use pre-paid cell phones.

Days later, on October 16th 2009, Raj was arrested for insider trading.

Click here to see photos of Raj's amazing Miami condo at the Setai >

Source: Anil Kumar's testimony

NOW: Everyone says Raj had a terrible reputation

Several investors, as well as people in the industry have told us that Raj had a terrible reputation.

'People say I don't understand the markets and all that,' Raj said in 2008.

This is the reputation he will be remembered by. His 'edge,' said the prosecution, which Raj used to make money for investors and run Galleon successfully, was nothing better or more advanced than common 'thievery.'

One investor said that his firm chose not to invest with Raj because he attended an investor meeting and believed it was 'weird,' 'intense,' and he got the sense that the firm employed some who were not good people.

NOW: Thanks only to the judge's mercy, Raj might be locked up in a Federal Medical centre in New Jersey.

Otherwise, he's headed to jail with a progressive, degenerative disease, advanced diabetes causing kidney failure.

Judge Holwell said he is not sure that Raj will be properly cared for in jail. He said he will recommend that Raj spend his time locked up in a Federal Medical centre in North Carolina, where Bernie Madoff was sent after being beaten in jail, but it's not guaranteed.

NOW: No hedge fund managers up to Raj

'This case has already sent a message to Wall Street,' said Lynam.

The message is simple. Raj's brutal reality.

'Insider trading means a loss of career, life, that you're subjected to ridicule, and the exposure of your most private affairs.'

'No one running a hedge fund would want to trade places with Raj.'

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