United States v. Rajaratnam
2011 U.S. Dist. LEXIS 91365
S.D.N.Y.2011Background
- May 11, 2011 jury found Rajaratnam guilty on five conspiracy and nine securities‑fraud counts; Rule 29 acquittal motions denied.
- Indictment (Jan 20, 2011) charged five conspiracy counts and nine insider trading counts; trial began Mar 8, 2011 and lasted eight weeks.
- Rajaratnam moved for judgment of acquittal at close of the government's case (Apr 6) and again after evidence (Apr 18); decision preserved.
- Jury verdict followed; Rajaratnam renewed Rule 29 motion on May 25, 2011; court denied the motion in full.
- Court laid out Rule 29 standard and conspiracy/insider trading standards, emphasizing circumstantial evidence sufficiency and deference to jury findings in conspiracy cases.
- Evidence spans multiple conspiracies and tipper/tippee relationships (Galleon Smith/Gupta, Khan, Goel, Kumar, Chiesi) and numerous wiretapped calls, emails, and trading patterns to support guilt beyond a reasonable doubt.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Count One conspiracy to insider trade is proven | Smith testimony alone could sustain conspiracy | No knowledge Rajaratnam knew insiders; reliance on ambiguous facts | Evidence sufficient to establish conspiracy beyond a reasonable doubt |
| Whether Counts Two and Three are supported | Timing of calls and trades, plus circumstantial evidence, proves conspiracies | Insufficient proof Rajaratnam knew Khan connected to insiders; no direct content | Sufficient circumstantial evidence supports Counts Two and Three |
| Whether Count Four and Count Five conspiracies with Kumar and Chiesi are proved | Wiretaps, emails, and trading records show tip and benefit to tipper | Goel/Kumar testimony insufficient without precise content of tips | Evidence sufficient to prove conspiracies with Kumar and Chiesi beyond a reasonable doubt |
| Whether Counts Six-Ten (substantive) for Clearwire, Akamai, PeopleSupport, ATI, Intel are proven | Tipper information, timing, and profit evidence establish material nonpublic information | Public discourse and event studies undermine materiality | Sufficient evidence for all substantive Counts Six-Ten |
| Whether the insider trading standards (materiality, tipper/tippee liability) were correctly applied | Information must be material and nonpublic; multiple levels of tippees permitted | Requires direct evidence of content and breach by tipper | Court properly applied material/nonpublic information standard and derivative liability principles |
Key Cases Cited
- McDermott v. United States, 245 F.3d 133 (2d Cir.2001) (circumstantial proof can sustain conspiracy in insider trading; evidence may be indirect)
- Santos, United States v., 541 F.3d 63 (2d Cir.2008) (deference to jury findings in conspiracy cases; secrecy of conspiracies limits direct proof)
- Desena, United States v., 287 F.3d 170 (2d Cir.2002) (credit all reasonable inferences in favor of jury verdict; address credibility issues for appellate review)
- Dirks v. SEC, 463 U.S. 646 (1983) (tippee liability requires breach and awareness of fiduciary breach; derivative liability)
- O'Hagan, United States v., 521 U.S. 642 (1997) (insider trading extends to tippees; fiduciary duties and nonpublic information)