The brother of an imprisoned ex-billionaire hedge-fund founder was acquitted of conspiracy on Tuesday, handing Manhattan prosecutors their first loss after dozens of insider-trading convictions in prosecutions that relied heavily on wiretaps and the testimony of those who pleaded guilty.
After the verdict was announced, Rengan Rajaratnam hugged three attorneys before jurors even left the room. The smiling 43-year-old defendant then hugged his relatives and others, before leaving the courthouse without commenting. He still faces civil charges from the Securities and Exchange Commission.
“Today is the day Rengan has been waiting for,” his lawyer, Daniel Gitner, said before leaving the courthouse. “We thank the jury for its careful attention. Rengan looks forward to getting on with his life.”
Federal judge Naomi Reice Buchwald had dismissed the two most serious charges in May, and prosecutors had withdrawn two other charges when the judge raised questions about them in a written opinion.
In a statement, U.S. Attorney Preet Bharara said his office was “disappointed with the verdict on the sole count that the jury was permitted to consider.”
The defendant’s brother, Raj Rajaratnam – founder of the Galleon Group of hedge funds – is serving an 11-year sentence after the government said he earned up to $75 million illegally by trading on secrets provided by corrupt employees of public companies and a network of analysts and portfolio managers who also obtained inside information.
Two dozen other defendants have pleaded guilty or were convicted in the case. In all, prosecutors have obtained guilty pleas or jury verdicts against 81 individuals in insider-trading cases in the last six years. The probe, initially focused on hedge-fund portfolio managers, analysts and employees of public companies, eventually was extended to individuals working at networking companies that were hired by traders to provide research.
Prosecutors had alleged that Rengan Rajaratnam joined with his brother to cheat in the stock market in 2008 on the securities of two technology companies.
Gitner said in closing arguments Monday that the prosecution had “failed on every score” to prove its case.
He told jurors that his client was living in Brazil when he learned of the charges, and had immediately announced: “I am innocent. This is about my brother, not me. I want to go back. I want to clear my name.”
Assistant U.S. Attorney Christopher Frey urged jurors during a rebuttal summation Monday to use their common sense and review trading records.
The charge against Rengan Rajaratnam was an extension of charges against his brother and others in a prosecution in which the government touted its novel use of wiretaps to catch Wall Street professionals acting illegally.