Taken Into Custody at JFK Int'l Airport. 

[ by Melanie Gretchen ]

Raj Rajaratnam, founder of the Galleon Group, is in no position to help his younger brother who apparently is following in this older brother's footsetps.  Young Rajaratnam, who worked for his brother at the now-defunct Galleon Group, is charged with illegally using insider information when trading tech stocks. It's been 2 years since the older Rajaratnam was convicted.  Like his brother, brother Rengan pled not guilty.

Rengan issued his not-guilty plea before Judge Naomi Reice Buchwald in Federal District Court in Manhattan.  Prosecutors contend Rengan made about $1.2 million in illicit procedures by trading on insider information.

The charges derive from Raj's trial, at which prosecutors played several wiretapped conversations between the 2 brothers.  The brothers allegedly shared confidential information about Hilton Hotels, Polycom, and Akamai Technologies.  After the U.S. attorney's offices charged Rengan, federal authorities arrested him the moment he voluntarily flew into JFK into FBI custody on Sunday.

Rengan, a U.S. citizen born in Sri Lanka, graduated from U. of P. and Stanford B-School before joining Wall Street.  Prior to joining Galleon, Rengan worked at Morgan Stanley and SAC Capital Advisors.  He attracted the attention of federal securities regulators during an investigation of Sedna Capital, a small hedge fund that Rengan ran from 2003 to 2004.  Investigators reportedly found emails and IMs between the brothers hinting at the possibility of the exchange of secret corporate information.

Rengan now is one of 30 people charged in the investigation of the so-called Galleon Ring.  He faces up to 25 years in prison, though he's expected to receive less than that.  Regan surrendered his passport and was released on $1 million bail.  He will next appear in court on 6/4/13. 

U.S. Attorney in Manhattan Preet Bharara, had this to say last week:

"Rengan Rajaratnam and his brother shared more than DNA.  Along with his brother Raj, Rengan Rajaratnam was allegedly at the heart of an insider-trading scheme that swept up an unprecedented number of people."

Perhaps the whole family is not problematic: a middle brother, Ragakanthan (aka R.K.) worked for Galleon, yet has not been charged with wrongdoing.

For further details, go to [Dealbook, 3/25/13].

To contact Melanie Gretchen: melanie@compliance-insights.com.