Today, in a case closely watched on Wall Street, a federal Jury in New York convicted Raj Rajaratnam, the Managing Member of Galleon Management, LLC, of five counts of conspiracy to commit securities fraud and nine counts of securities fraud, stemming from what prosecutors called "his involvement in the largest hedge fund insider trading scheme in history."
Prosecutors stated that Mr. Rajaratnam received non-public, material insider information through overlapping conspiracies from insiders and others at hedge funds, public companies, and investor relations firms, such as Goldman Sachs, Intel, IBM, McKinsey and others. Prosecutors argued that he then executed trades in the stock of public companies, including Goldman Sachs, Clearwire, Akamai, AMD, Intel, Polycom, and PeopleSupport. The evidence in the eight-week trial included numerous recordings of wiretapped phone calls between Mr. Rajaratnam and co-conspirators (many of whom pled guilty). According to media reports, defense counsel, who argued that Mr. Rajaratnam pieced together information from a variety of sources to reach a decision on investing, plans to appeal.
Each conspiracy conviction carries a maximum penalty of five years, while each insider trading charge carries a maximum of twenty years. Mr. Rajaratnam is scheduled to be sentenced on July 29, 2011.…
Continue Reading →
On Tuesday, May 10, 2011, a federal jury convicted Lindsey Manufacturing Company (a privately-held company), its President Keith Lindsey, its Vice President Steve Lee and an intermediary, Angela Aguilar in an FCPA case. The charges were based on payments to employees of the Comisión Federal de Electricidad ("CFE"), an electric utility company owned by the government of Mexico, which were made in exchange for the CFE to award contracts to Lindsey Manufacturing. The case is notable for two different reasons: (1) Lindsey Manufacturing was the first corporate defendant to fully litigate FCPA charges through trial; and (2) Lindsey Manufacturing was one of the three recent cases where defendants raised the argument as to whether the FCPA extended to payments made to employees of foreign state-owned companies, an assertion which failed in this instance. UPDATE on May 16, 2011 – Professor Michael Koehler of the FCPA Professor Blog reports that Lindsey Manufacturing was NOT the first company to litigate an FCPA case all the way through trial: "That first occurred in 1990-1991 when Harris Corporation (and certain of its executives) prevailed in an FCPA trial." …
Continue Reading →
On May 2, 2011, a derivative complaint was filed against eleven members of the Board of Directors of Johnson & Johnson alleging breach of fiduciary duty, mismanagement and violations of the federal securities laws based on the company’s recent settlements with the Department of Justice and the Securities Exchange Commission regarding violations of the Foreign Corrupt Practices Act. As Kevin LaCroix’s blog, The D & O Diary, pointed out, this was the "the first civil lawsuit relating to" the Government’s investigations into "whether drug companies paid bribes overseas to increase sales and to obtain regulatory approvals."
On April 8, 2011, DOJ announced that Johnson & Johnson had agreed to pay a $21.4 million criminal penalty as part of a deferred prosecution agreement to resolve improper payments by its subsidiaries to government officials in Greece, Poland and Romania and kickbacks paid to the former government of Iraq under the United Nations Oil for Food Program in violation of the FCPA. The same day, the SEC announced that it had charged Johnson & Johnson with violating the FCPA based on same conduct. The company settled with the SEC by consenting to a court order permanently enjoining it from future violations of certain provisions of the Exchange Act and agreeing to pay over $38 million in disgorgement and $10 million in prejudgment interest.
In the shareholders’ derivative lawsuit, Wollman v. Coleman, No. 11-cv-02511 (D.N.J. Filed May 2, 2011), plaintiffs alleged that the Board members failed to implement internal controls to detect …
Continue Reading →