A US court has acquitted the younger brother of jailed hedge fund manager Raj Rajaratnam of conspiring with him in an insider trading scheme, marking the first defeat in an impeccable track record of insider trading prosecutions for India-born federal prosecutor Preet Bharara.
Rengan Rajaratnam (43) was found not guilty on Tuesday by the jury of eight women and four men judge after a three-week trial on the sole conspiracy count.
Last year, Rengan was charged with conspiracy and securities fraud. The jury cleared him of the single charge against him.
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The verdict came as a blow to Bharara and his team of federal prosecutors who have not lost a case in the years-long crackdown on insider trading on Wall Street.
Bharara’s office has secured 85 convictions and guilty pleas from traders, analysts, industry consultants including by billionaire investor Steven Cohen, former Goldman Sachs director Rajat Gupta and Sri Lankan founder of the Galleon hedge fund Rajaratnam, who is currently serving an 11-year prison sentence.
Expressing disappointment at the verdict, Bharara said his team will continue to investigate and prosecute those violate federal securities laws.
“While we are disappointed with the verdict on the sole count that the jury was permitted to consider, we respect the jury trial system whatever the outcome, and we thank the jury for their service.
“This Office maintains its faith in the criminal justice system, a system that has resulted in the convictions by trial or guilty plea of 85 other defendants on insider trading charges. We will continue to seek justice in the investigation and prosecution of those who violate the securities laws of the US,” Bharara said in a statement.
Prosecutors had dropped four counts against Rengan before trial while last week the judge overseeing the trial dismissed the two most serious securities fraud charges against him.
US District Judge Naomi Buchwald had ruled that there was not enough evidence to support the charges and told prosecutors some of their arguments were “singularly unpersuasive”.
The trial had mostly focused on phone calls between Raj Rajaratnam and other co-conspirators in which Rengan did not participate.
Buchwald had said last week that prosecutors could not hold Rengan responsible for his brother’s crimes and that they needed to focus on what Rengan did and not “just on dirt on everyone else”.
Rengan’s lawyer, Daniel Gitner, had said at trial at the government failed to prove its case and charged his client only based on evidence gathered against his older brother.