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Mr. Rajaratnam based his defence on the so-called mosaic theory of investing. Galleon was famous for its dogged digging for information about publicly traded companies that would form a “mosaic” a complete picture of a company's prospects that gave it an investment edge over other investors.
Mr. Rajaratnam's lawyers argued that all of his supposed illegal trading was grounded in publicly available newspaper articles, analyst reports and company news releases.
For instance, defence presented evidence showing that before Advanced Micro Devices acquired ATI Technologies, a deal that prosecutors said Mr. Rajaratnam had received an illegal tip about, 51 news articles and six analyst reports speculated on the likelihood of a merger between the two companies.
Prosecutors dismantled Mr. Rajaratnam's defence by acknowledging that Galleon performed legitimate research. But at the same time, they argued, the firm routinely violated securities laws. In the words of a former Galleon portfolio manager who testified during the trial, the firm did its homework but also cheated on the test.
“The defendant knew the rules, but he did not care,” said a prosecutor, Reed Brodsky, in his summation. “Cheating became part of his business model.”
Mr. Rajaratnam's arrest halted a remarkable Wall Street success story. A native of Sri Lanka, Rajaratnam came to the United States in 1981 to study business at the prestigious Wharton School at the University of Pennsylvania. He joined Needham & Co., a small investment bank, and carved out a reputation as an expert in technology companies.
His ascent coincided with both the tech boom of the 1990s and the emergence of hedge funds, a once obscure pocket of the investment world, into a powerful force on Wall Street. When he formed his own hedge fund, Galleon Group, in 1997, his services were in hot demand. Mr. Rajaratnam posted superior investment returns, attracting blue chip investors like New Jersey's state pension fund and UBS, the giant Swiss bank.
Galleon brought Mr. Rajaratnam great wealth. Forbes magazine pegged his net worth at $1.3 billion. He owns a second home in the wealthy suburb of Greenwich, Conn., and a condominium at the Setai Hotel in Miami Beach. During the trial, Mr. Rajaratnam's former friends told the jury about lavish vacations including, for his 50th birthday, chartering a private jet to fly dozens of family and friends for a safari in Kenya.
Fiercely competitive, Mr. Rajaratnam could be heard during the trial on wiretaps speaking in sports and military metaphors. He compared himself to fighting Muhammad Ali in the boxing ring and said during the financial crisis, “I'm feeling the pain, but they can't kill me. I'm a warrior.”
It was that competitiveness that caused Mr. Rajaratnam, despite his facing a blizzard of incriminating evidence, to fight the charges against him, according to two former Galleon employees who requested anonymity.
“Raj hated to lose and loved a good fight,” one former colleague said. “He's a big sports fan, and I think in some ways he viewed this trial as a contest.”
Another said Mr. Rajaratnam took great pride in his accomplishments and refused to admit to any wrongdoing.
“This way, Raj can say he was wrongfully accused,” he said.
The origins of Mr. Rajaratnam's case stretch back more than a decade, but a turning point came in 2006 during an investigation of a hedge fund run by Rengan Rajaratnam, Mr. Rajaratnam's younger brother and a former Galleon employee. While reviewing e-mails and instant messages, Andrew Michaelson, now a member of the team that prosecuted Mr. Raj Rajaratnam, discovered incriminating communications between the brothers. — New York Times News Service
(Azam Ahmed and Evelyn M. Rusli contributed reporting.)