Updated October 25, 2017
Sri Lanka Express
Trustee sues on behalf of creditors to recover millions Rajaratnam took from Galleon
Trustee sues on behalf of creditors to recover millions Rajaratnam took from Galleon
Disgraced billionaire Raj Rajaratnam who is serving an 11-year sentence in federal prison for insider trading is facing a new lawsuit, this time in New York bankruptcy court.
An adversary proceeding filed April 18 by Alan Nisselson, trustee overseeing the liquidation of Galleon, says Rajaratnam paid himself around $131 million from Galleon Management LP, one of his company's units while he faced insider trading charges in 2010.
Also named in the suit are former Galleon executives George Lau and Richard Schutte.
According to the lawsuit Rajaratnam received $US13 million from selling a claim in the Lehman Brothers bankruptcy that had been held by a Galleon fund. Some of the money was described as salary, but the trustee sees the amount transferred as “far in excess” of any salary owed to Rajaratnam.
On Dec. 21 and 22, 2010, Galleon Management paid out $40 million and $78.5 million to Rajaratnam as "deferred fees" and "capital," which the lawsuit says is ”far in excess of any consideration received” by Galleon Management from its founder.
Raj Rajaratnam
"The December 2010 transfers also were not made in good faith because they preferred the individual defendant insiders to actual creditors of the debtor," said trustee who is trying to recover money on behalf of creditors of Galleon Management which entered Chapter 7 bankruptcy proceedings in 2015.
He was convicted in May 2011 on nine securities fraud counts and five conspiracy counts. He has served a little more than five years in prison. He is scheduled to remain behind bars until July 2021.
Rajaratnam suffered another setback earlier this year when a New York federal judge rejected his bid to have his 11-year prison sentence reduced, March 3.
U.S. District Judge Loretta Preska in Manhattan said Rajaratnam failed to show his actual innocence on five of the 14 counts on which he was convicted, or that two other counts should be vacated because the main government witness committed perjury, according to a Reuters report.
Additionally, the judge rejected his complaint that his trial counsel was ineffective, therefore denying the former hedge fund firm head a bid to reduce the $53.8 million he agreed to forfeit to about $4.3 million.
Meanwhile, the lawsuit filed against Rajaratnam in October 2009 by victims and survivors of LTTE attacks is in the discovery stage in the US District Court, New Jersey. On April 4, US Judge Joseph Dickson ordered that Phase 1 depositions noticed or subpoenaed on or before September 30, 2016 be completed by May 31, 2017.
The lawsuit alleges that the Rajaratnam family sent millions of dollars to the Tamil Tigers, thereby indirectly funding a series of suicide bombings between November 2007 and April 2008.
The complaint claims that Rajaratnam and his father Jesuthasan Mylvaganam Rajaratnam “are members of the global Tamil expatriate community who knowingly and purposefully helped fund LTTE’s terror campaign.”
Jesuthasan was a top executive and business consultant for Singer Sewing Machine Company in Sri Lanka and later in New York. He was president of the Illankai Thamil Sangam and a founding member and vice president of the World Tamil Organization. He died in June 2014.