Feds Missed Galleon Warning Signs

JPMorgan warned that fund dealt in 'grey areas'
By Kevin Spak,  Newser Staff
Posted Oct 30, 2009 10:10 AM CDT
Raj Rajaratnam, billionaire founder of the Galleon Group, a major hedge fund, is led in handcuffs from FBI headquarters in New York, Oct. 16, 2009.   (AP Photo/ Louis Lanzano)
camera-icon View 1 more image

(Newser) – The government says its star witness, Roomy Khan, was the first person to pass inside info to Galleon Group honcho Raj Rajaratnam, and went on to become a central part in his operation. Which is awkward, because Khan was prosecuted in 2000 for passing insider information to someone at Galleon—and sources tell the New York Times that that someone was Raj Rajaratnam.

Khan wound doing 6 months of house arrest, but authorities never pursued Galleon or Rajaratnam. After her release, she eventually resumed passing illicit info to Rajaratnam, prosecutors say. Nor was Khan the only red flag pointing to Galleon. In 2001, a JPMorgan analyst warned the company to pull out of Galleon, citing “more negative news about Raj,” who, along with other Galleon principals, “liked to operate in the ‘grey areas,’” reports the Financial Times, which has seen the document.