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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
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(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.

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.
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)
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.
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)
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COMMENTS
Showing 3 of 4 comments
So_Cal_Larry
Oct 31, 2009 7:52 AM CDT
First - it's all fixed. Period. This little affair is only the tip of a gigantic iceberg which will never be surveyed for its size. Second, when we speak of the 'feds' we really mean the incompetents at the SEC. Two problems in the SEC - their examiners were attorneys, not accountants. Even as attorneys, the Bush administration, and its incompetent political SEC Chairman, right wing conservative Chris Cox knew NADA about the business, didn't care to learn, and was lessez faire regarding Wall Street fat cats. In short, there intentionally was almost no examination and regulation of Wall Street by the 'feds'. It's how the national wealth gets transferred to the wealthy elite of the nation. Get smart, people.
JoeQ
Oct 30, 2009 6:35 AM CDT
The whole concept of insider trading is utterly nebulous. They probably went after the guy because of his philanthropies.
Netstorm2k10
Oct 30, 2009 5:15 AM CDT
Concur.

 
insider trading • JPMorgan Chase • Raj Rajaratnam • Galleon Group • Roomy Khan

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