Raj Rajaratnam brother charged with insider trading

Raj Rajaratnam brother charged with insider trading Thu, Mar 21 18:39 PM EDT By Nate Raymond NEW YORK (Reuters) - Raj Rajaratnam's younger brother was indicted on charges of conspiring in the insider-trading scheme for which the founder of the Galleon Group hedge fund was convicted nearly two years ago, U.S. prosecutors announced on Thursday. Prosecutors said Rengan Rajaratnam, 42, conspired with his older brother to trade on non-public information concerning Clearwire Corp and Advanced Micro Devices Inc in 2008. Rengan Rajaratnam was a portfolio manager at Galleon, and the trades for which he was charged resulted in nearly $1.2 million of illegal profit, according to U.S. Attorney Preet Bharara in Manhattan, who announced the charges. Rengan Rajaratnam was charged with six counts of securities fraud and one count of conspiracy, and faces up to 20 years in prison on each of the fraud counts. He has not been arrested. He is not in the United States and is believed to be in Brazil, a person familiar with the matter said. David Tobin, a lawyer for Rengan Rajaratnam, did not immediately respond to a request for comment. The charges arise from a broad U.S. government crackdown on insider trading. Since October 2009, seventy-seven people have been charged by Bharara's office in that probe, and 71 have been convicted. The FBI and U.S. Securities and Exchange Commission are still investigating. Raj Rajaratnam, 55, received an 11-year prison sentence in October 2011 after a jury convicted him the previous May. He is appealing his conviction, as well as the government's use of wiretaps to obtain it. Wiretap evidence was also used in the case against Rengan Rajaratnam. "Rengan Rajaratnam and his brother shared more than DNA," Bharara said in a statement. "They also shared a penchant for insider trading." The SEC filed separate civil charges against Rengan Rajaratnam, whose full first name is Rajarengan. The SEC lawsuit alleges a broader scheme that netted $3 million in illicit gains for Rengan Rajaratnam and hedge funds he managed following trades on stocks including Polycom Inc and Hilton Hotels. The Polycom trade took place in January 2006 when Rengan Rajaratnam was a portfolio manager at Sedna Capital Management, which he founded in 2004. Before founding the firm, he worked briefly at Steven Cohen's SAC Capital Advisors LP as an analyst, the SEC said. 'GONNA RIP' Some of the allegations in the criminal case relate to activity that prosecutors said took place in March 2008. That made it an imperative to bring securities fraud charges on those allegations now, because of a five-year statute of limitations. Thursday's charges focus on two particular instances of Rajaratnam obtaining inside information. The first came in March 2008 after Rajiv Goel, then an executive at Intel Corp, told Raj Rajaratnam about Intel's plans to make a $1 billion investment in Clearwire. After a news report describing some details of that transaction surfaced, the younger Rajaratnam allegedly said on a phone call to his brother that the "Clearwire stuff ... just hit." "So, I don't know how much you got in today, but I think (Clearwire's share price) is gonna rip tomorrow," Rengan Rajaratnam said, referring to Raj Rajaratnam's Clearwire purchases that day and the possible direction of its stock price the next day. Prosecutors said Rengan Rajaratnam earned $101,070 from Clearwire trades in his personal brokerage account, while two Galleon funds he oversaw earned a combined $1.08 million. Goel cooperated with prosecutors in the probe. He pleaded guilty to conspiracy to commit securities fraud in 2010 and was sentenced in September to two years probation. SPILLING THE BEANS The second instance concerned information received from former McKinsey & Co director Anil Kumar, who was sentenced to two years probation last July following an earlier guilty plea to securities fraud charges. Prosecutors said that in August 2008 Kumar told Raj Rajaratnam about a deal between McKinsey client AMD and the Abu Dhabi Investment Authority, and that three hours later Raj Rajaratnam advised his brother about it. They said that after Raj Rajaratnam bought 3 million AMD shares for a hedge fund he managed and 250,000 shares for a fund his brother managed, Rengan Rajaratnam told his brother by phone that another McKinsey partner "spilled his beans" and "volunteered the information about the investments" in AMD. The other McKinsey partner is David Palecek, according to the SEC complaint. He died in 2010. Catherine Redlich, a lawyer who represented Palecek in the investigation, in an email said "there is no proof David ever agreed to provide inside information to the Rajaratnams and no proof that he received money or other benefits from them for doing so." A representative for McKinsey did not immediately respond to a request for comment. Former McKinsey chief Rajat Gupta is separately appealing his conviction and two-year prison term for feeding information to Raj Rajaratnam that he had learned from board meetings at Goldman Sachs Group Inc, where he had been a director. The cases are U.S. v. Rajaratnam, U.S. District Court, Southern District of New York, No. 13-cr-00211; and SEC v. Rajaratnam in the same court, No. 13-01894. (Reporting by Nate Raymond in New York; Editing by Gary Hill, Richard Chang, David Gregorio and Steve Orlofsky)

Japan's Softbank to buy 70 percent of Sprint for $20.1 billion

Mon, Oct 15 07:01 AM EDT 1 of 7 By Mari Saito and Tim Kelly TOKYO (Reuters) - Japanese mobile operator Softbank Corp said it will buy about 70 percent of Sprint Nextel Corp, the third-largest U.S. carrier, for $20.1 billion - the most a Japanese firm has spent on an overseas acquisition. The deal, announced by Softbank's billionaire founder and chief Masayoshi Son and Sprint CEO Dan Hesse at a packed news conference in Tokyo on Monday, gives Softbank an entry into a U.S. market that still shows growth, while Japan's market is stagnating. It also gives Sprint the firepower to buy peers and build out its 4G network to compete better in a market dominated by AT&T and Verizon Wireless. Analysts have long said the U.S. telecoms industry needs consolidation, but few looked to Japan as a catalyst. Some investors worry Softbank is biting off more than it can chew. But the 55-year-old Son, a rare risk-taker in Japan's often cautious business circles, is betting U.S. growth can offer relief from cut-throat competition in Japan's saturated mobile market. Combined, Softbank and Sprint will have 96 million users. "It could be safe if you do nothing, and our challenge in the U.S. is not going to be easy at all. We must enter a new market, one with a different culture, and we must start again from zero after all we have built," he told the news conference. "But not taking this challenge will be a bigger risk." FIRE-POWER Softbank said that as part of the deal it would buy $3.1 billion of bonds convertible into Sprint stock at $5.25 a share, while about 55 percent of existing Sprint shares would be exchanged for $7.30 per share in cash, with the transactions to be completed by mid-2013. Sprint shares closed Friday at $5.73. Hesse, who will stay on as Sprint CEO, said the Softbank investment would give Sprint opportunities it hadn't had since he joined the firm in late-2007, and enable the U.S. firm to play a bigger role in future market consolidation. "This is pro-competitive and pro-consumer in the U.S. because it creates a stronger No. 3 ... it competes with the duopoly of AT&T and Verizon. When you look at what Softbank has accomplished in Japan with the No. 3 carrier, it's something we can learn from," he said. Softbank shares tumbled more than 8 percent earlier on Monday, closing down 5.3 percent at their lowest finish in 5 months. The stock has lost more than a fifth of its value - or $8.7 billion - since news first broke late last week of the firm's interest in Sprint. On Monday, credit rating agency Moody's said it was reviewing Softbank's ratings for a possible downgrade, but some analysts said Son's gamble might pay off in the end. "It's the same (market) reaction as when Softbank said it was going to buy Vodafone a few years ago. Everyone came out and said it was far too expensive," Fumiyuki Nakanishi, general manager of investment and research at SMBC Friend Securities, said ahead of the announcement. Softbank bought Vodafone's Japan unit for $15.5 billion in 2006. "Son made a company worth 3 trillion yen, and now it will be worth 6 trillion yen. That's quite impressive, and I think investors will realize he's making the right decision down the road," said Nakanishi. Four banks - Mizuho Financial Group Inc, Sumitomo Mitsui Financial Group, Mitsubishi UFJ Financial Group and Deutsche Bank - have approved loans totaling 1.65 trillion yen ($21.1 billion) to Softbank, three sources with direct knowledge of the matter told Reuters. Sprint, which has lost money in all of the last 19 quarters, has net debt of about $15 billion, while Softbank has net debt of about $10 billion. Brokers have warned that the deal could leave Softbank with "unacceptably high" gearing, a ratio of its debt to shareholder capital. Standard & Poor's has warned the deal "may undermine Softbank's financial risk profile" and would pressure its free operating cash flow for the next few years. Reflecting those concerns, Softbank's 5-year credit default swap spreads - the cost of protecting its debt against default - widened to 267/327 basis points from around 160 basis points before the deal, and yields on its yen bonds have risen sharply. NO CLEARWIRE OBLIGATION Analysts have said that Softbank buying 70 percent of Sprint for $20 billion would imply the No. 3 U.S. wireless company was worth about $28.6 billion, some two-thirds greater than its market capitalization at Friday's close. Sprint, which is going through a $7 billion upgrade of one of its networks, while closing its Nextel iDen network, could use some of the proceeds to buy the part of Clearwire Corp it doesn't already own, analysts have said. Clearwire has high-speed infrastructure that is attractive to mobile carriers struggling with the increase in data due to the rising numbers of smartphone users. Shares in Clearwire, 48 percent-owned by Sprint, soared on Friday. Softbank said, however, that the deal did not require Sprint to take any action involving Clearwire. An alliance with Sprint could also give Softbank leverage when dealing with Apple Inc, helping bolster its domestic position against KDDI Corp, which also offers the iPhone in Japan, and market leader NTT Docomo, which is yet to offer the Apple smartphone. With Sprint in hand, Softbank may also look to acquire smaller U.S. carrier MetroPCS Communications, Japanese media have reported. Sprint has had a long interest in MetroPCS, which earlier this month agreed to merge with T-Mobile USA, part of Deutsche Telekom AG. The Sprint deal takes outbound deals by Japanese firms to a record $75 billion this year, Thomson Reuters data shows, underscoring a strong appetite for overseas assets seemingly unaffected by signs of slowing global growth. This is not the first Japanese foray into telecoms overseas. NTT Docomo racked up big losses after a string of failed investments in names like AT&T Wireless and Taiwan mobile operator KG Telecom in the late 1990s and early 2000s. Raine Group LLC, a boutique merchant bank focused on the technology, media and telecoms sector, and Mizuho Securities were lead financial advisers to Softbank. ($1 = 78.3550 Japanese yen) (Additional reporting by Nadia Damouni in New York and Taro Fuse, Sophie Knight, James Topham, Andrea Shalal-Esa in Tokyo; Writing by Linda Sieg; Editing by Ian Geoghegan) ================