Galleon’s Raj Rajaratnam Speaks Out After 7 Years In Prison For Insider Trading

Galleon’s Raj Rajaratnam Speaks Out After 7 Years In Prison For Insider Trading
Image source: CNBC Video Screenshot

Following is the unofficial transcript of a CNBC interview with Galleon Group Founder and “Uneven Justice: The Plot to Sink Galleon” Author Raj Rajaratnam on CNBC’s “Squawk Box” (M-F, 6AM-9AM ET) today, Wednesday, December 8th. Following is a link to video on

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Galleon Group's Rajaratnam Speaks Out After 7 Years In Prison For Insider Trading

ANDREW ROSS SORKIN: Welcome back to “Squawk Box” this morning. In 2011, billionaire and Galleon Group Founder Raj Rajaratnam was convicted of 14 counts of securities fraud and conspiracy. Prosecutors accused him of making tens of millions of dollars by trading illegally and stocks like eBay Inc (NASDAQ:EBAY), Goldman Sachs (NYSE:GS) and Alphabet Inc (NASDAQ:GOOGL), then known as Google. Now he’s spent seven years in prison, paid more than $150 million in fines and this morning, we have his first interview since he was released from prison two years ago. Joining us this morning is Raj Rajaratnam, founder of the Galleon Group and author of a new book, “Uneven Justice: The Plot to Sink Galleon,” which is out next week. Good morning.

RAJ RAJARATNAM: Good morning.

SORKIN: Thank you for being with us. It has been quite some time and quite a, quite a story that you have lived. You have paid as we just said $150 million. You've been in prison for seven years and you haven't spoken throughout all of it and now you are. Why?

RAJARATNAM: Well, excuse me. I had a firsthand view of how the process works. I believe that law and order is extremely important for any civic society. But my experience is something that should concern every American citizen and let me elaborate. Number one, people who care about civil liberties should understand what I went through. Number two, I believe strongly that there should be checks and balances and a small group of prosecutors, for whatever reason, bend the rules to win at all costs. And as your newspaper this Sunday, the New York Times editorial said, there needs to be balances for prosecutors who overreach and that's the reason. I want to talk about this social justice issues. I think it's extremely important. I don't necessarily want to relitigate the case.

SORKIN: Let me ask you this. You've maintained your innocence throughout this, but you were convicted by a jury. You appealed the case. The appeals court effectively reaffirmed the decision. Do you believe in the justice system?

RAJARATNAM: Overall I do. When I decided to become a United States citizen in 1983, I accepted the rules of this country and so I accept the verdict of the jury because that's the bedrock of American judicial system. But let me step back. The the, the jury, another jury, in the case of a coconspirator, the same Southern District, the same charges with the same witnesses found the defendant not guilty. And you might ask me why? And because the star witness in my case, reversed his testimony totally and said he didn't give me any information that he thought was important. Then you might again ask me why? Because he was already sentenced to two years probation and he was no longer under the leash of the prosecutor. Let me explain further. Five years after my conviction, yes, I did lose the appeal. The second circuit rejected Mr. Bharara’s theory of insider trading

SORKIN: Preet Bharara

RAJARATNAM: Preet Bharara. And said that the downstream tippee should not be held guilty. My contention is this, go after the original tipper, the insider who gave the information. So what is interesting to me is that in 2020 when Preet Bharara was no longer under the publicity, public light and glare, he assembled a taskforce and the conclusion, he called it the Bharara taskforce, and the conclusion was that insider trading laws are murky. It needs to be defined, and they feel sorry for the market participants. So, my question is, if you thought it was murky in 2020, how did you convict any people in 2010? Now, let me explain. I do accept the verdict of the jury as an American citizen. It's the bedrock of American justice. But what I'm trying to convey here is there needs to be checks and balances.

SORKIN: But are you suggesting that being a quote, unquote “tippee” in an insider trading case effectively, that being the tippee should be considered legal and are you suggesting you, you were the tippee?

RAJARATNAM: No, you have a tipper. What I’m merely saying what the Second Circuit affirmed that the tippee should know of that an insider violated his fiduciary responsibility and gave a benefit. That's not my, it's how the Second Circuit ruled five years after my conviction.

SORKIN: I understand that. What I'm asking is today, are you now saying or accepting that you were provided with information by a tipper as the tippee?

RAJARATNAM: I didn't understand at that time. You know, think about as a hedge fund manager, a large hedge fund manager, you get hundreds of calls a week with bits of information of varying degrees of reliability. You listen to them because you want to know what's in the market. Nobody said, “Hey, Raj, I just got this from somebody.” I didn't. I didn't know 90% of the source, the people who may or may not have violated. Plus, a lot of people in this business puff. They just say things. I want to make one point. 100% of my trades were based on the written analysis of my 35 analysts. We were in deep research. I spent 40 million a year on research.

SORKIN: What do you say to the critics who say two things. One is they say, look, you could have testified under oath and perhaps should have, so it's hard to speak now when you don't necessarily have to be under oath, I hope you're telling the truth, to speak out now, but not then.

RAJARATNAM: Well, as you know, my lawyer was a very seasoned veteran lawyer, John Dowd and our strategy was to show that every one of the conversations in the wiretap was in the public domain. And if it was in the public domain, his question to juries, why are we here? So, we were prepared to testify but he told me, “Raj, we won this case.”

SORKIN: He told you that you won the case.

RAJARATNAM: Prior to the jury's verdict. Now—

SORKIN: Do you believe, do you believe going into the verdict that you had won?

RAJARATNAM: Correct because he was expert. And I sat there and the former counsel of the SEC showed numerous articles, and numerous reports that showed that everything that was on the wiretap was in the public domain. So, I decided based on his advice, not to testify.

SORKIN: Let me ask you about this though because one of the issues is there is lots of things in the public domain and that was a huge part of your defense which is to say that there was written documentation of either analysts’ reports or news reports about speculation and whatnot, but isn’t it possible that that could exist at the same time and this is what the prosecutors contended that that could exist at the same time that these phone calls existed? In fact that the phone calls ultimately actually carried more weight than the documents.

RAJARATNAM: Okay, let me answer it this way. We had an existing position in each of these stocks prior to the phone calls. Now, I would maintain that the phone calls were illegally wiretapped. The affidavit by Agent Kang was full of lies and the judge ruled that the wiretaps had a reckless disregard for the truth. Yet he allowed the wiretaps and a lot of legal experts were alarmed that if this happened, other Americans could be wiretapped. I think that's a big, big issue. So, when you look at the wiretap through dirty people, what do you see? You see dirt. When you give snippets of wiretaps in the courtroom, you don't give the full picture. And so, I mean, the judge himself said, “If you call your mother and say you're coming for dinner, it could be seen criminal in a courtroom setting.”

SORKIN: So just take a step back, which is to say, and I accepted that you're suggesting that the wiretaps were illegal. But what I'm asking is, if we could put that aside for a second, the influence of those phone calls on your decision to make the trades. How important were those phone calls?

RAJARATNAM: Zero. As I said, I had a prior position in every one of these stocks. I listen to my analysts and these analysts, it wasn't that they came and talk to me. They had to write reports.

SORKIN: Can you tell us what I mean because we've never heard your side of the story. Very famously, Rajat Gupta who ran McKinsey was on the board of Goldman Sachs, apparently made this phone call to you in the middle of the financial crisis, right when Warren Buffett was about to make an investment in Goldman Sachs.


SORKIN: Do you remember all of that? And do you remember what he effectively told you?

RAJARATNAM: Yes, I know Rajat told you that he didn't remember it. It was a 16 second call. And I remember every second of that call.

SORKIN: So, what did he say?

RAJARATNAM: He was calling at about 3:54 or 3:50, just before the market closed to ask about the, his investment in Voyager, which was housed at Lehman Brothers. And Lehman had gone under and he wanted some documentation. So he called me when he got out of the – as I now found out, out of the Goldman Sachs board meeting. I had no idea that he was at a Goldman Sachs board meeting, I had no access to his calendar. And he said, “I'm calling about my investment in Voyager.” I said, Rajat, I think TARP is about to be passed. We had a consultant in Congress, sending us reports about where the TARP would be best. At 3:25, I got an email from the Cyprus Group – that was our consultant – saying it looks likely that TARP would be passed. So I said, “Rajat, I’m in the middle of a big trade, looks like TARP’s going to be passed. I'm going to buy a whole bunch of financial stocks.” And he said “that would be good for Goldman.” I said, “Thank you. I'll call you back later.” After that morning I bought Goldman Sachs, it wasn't like I bought Goldman Sachs from September. The morning I bought Goldman Sachs, I was buying Goldman Sachs and these are in my records. I bought Morgan Stanley, I bought the XLF, which was a financial index. But when you look at it through people, you say, oh, Rajaratnam bought Goldman Sachs. Obviously, I increased my position in all these stocks when my consultant said TARP is going to be passed. Warren Buffett never entered into my mind when I bought it.

SORKIN: I want to ask you a broader question. Just about the way trading happens and the way the public oftentimes thinks about Wall Street. They think that the whole business is unfair. That there's some kind of insider trading ring, that the access to information that you have, possibly, by the way, even from a consultant, for example, is different than the access that my mother might have. What do you think about that?

RAJARATNAM: Well, you know, we spent maybe 10 or 12 hours a day doing deep research. There's a theory called the Mosaic theory on Wall Street where you take little dots of information and connect it. And that's perfectly legal. Now, your mother might not spend 10 hours a day on Wall Street. What I would tell her is to give your money to Fidelity or a professional money manager, because we spend a lot of effort and time analyzing, reading research reports, analyzing 10Ks and 10Qs. We get access to the reports of brokerage firms like Morgan Stanley and Goldman Sachs. So yeah, it is the public. They don't spend enough time. Now I am so heartened that with Robin Hood and Covid, a lot of people are participating in the market. There's tremendous amount of information available and hopefully, lots of people will participate in the capital markets.

SORKIN: But let me ask you about this. In your book you wrote, “If I am guilty, then the entire investment business should be declared illegal.” What do you mean by that?

RAJARATNAM: I mean that if innocent chit chat – you can ask me, “Why do you chit chat?” Because you want to know what's in the market. Innocent chit chat where no granular information of mergers and acquisitions or earnings per share are considered guilty. Right? But that's what we do. I want – one of the reasons I wrote this book was to not necessarily litigate my case, but to talk about this bigger social issue. This is bigger than Raj Rajaratnam. But I do want my peers to read the book and judge me.

SORKIN: You were a billionaire before this began. Can I ask how much money you have right now?

RAJARATNAM: Well, you know, from where I come we don't advertise how much you have or how much you don't have. But let me say this. I'm comfortable. And since coming from prison, I have a clean canvas. My father when I was growing up, told me one thing that stuck with me. He said, “Raj, you should spend the first third of your life learning, the second third of your life earning and the last third of your life giving.” I'm 64 years old, I'm in the last third of my life. And I plan –and I’m fortunate enough that I can give to the less fortunate. Now, I didn't wait till the last third of my life to give. My father gave his entire estate to charity. I have given money to charity and I just want to correct you on one thing. I did not make a single cent. If everything I did was illegal, the money went to the investors. Right? It didn’t come to Raj Rajaratnam’s pocket. I gave more to charity than what was alleged that I was made. So how can you call me greedy? Do you understand what I’m trying to say?

SORKIN: I understand what you are trying to say, but –

RAJARATNAM: My point is this. I want to now give – and since coming out of prison, I have given to charity both in the United States and in the country that I was born.

SORKIN: You've said that the experience of being in prison changed you and change you for the better. Why?

RAJARATNAM: Well, I had a deeper appreciation for my friends who visited me not once, not twice, but many times. I had 110 people on my visitors list, which they tell me is a record. I had a deeper appreciation for my family, my wife and children who worked every step of this journey with me. I learned patience. You know, as a hedge fund manager you go from one adrenaline filled moment to another constantly. Short of time. I had time. So I think I became and I reflected more and so I think I became a bigger and better person.

SORKIN: If you could go back and do it all over again, what would you do differently? And I will say that I believe that the last sentence on the final page of the book says that you have no regrets and that surprised me.

RAJARATNAM: So let me tell you a little story. A year or two before I was released, my daughter who's a lawyer came to visit me with my family. And she said, ‘’Dad, we'd love to have you back home sooner or never go to prison. But we're so proud of you that you stood on principles and fought them despite understanding there's a trial penalty in this country.’’ Studies have shown that if you go to trial, they punish you and you get 2x the sentence that you would have gotten if you—

SORKIN: If you made a deal.

RAJARATNAM: If you made a deal. And if you became a cooperating witness, you get parole. That was the only time in this entire episode that tears came to my eyes. I looked at my other two children and they nodded. My wife was passive. But I knew what she was thinking. I had no regrets. I have had a charmed life. And as a first generation immigrant, I realize how lucky I am to live in this country. 5% of the world's people live in this country. I have no regrets. I am lucky. I don't see people lining up to emigrate to China, Russia, Japan, India. But they want to come to this country. And the reason they want to come to this country is you can speak out without being penalized.

SORKIN: Raj Rajaratnam, we appreciate you being here. Thank you. It's a fascinating book. It's a fascinating story. Insisting on your innocence. We appreciate it. The book is called Uneven Justice. And we look forward to following your progress. Becky, back to you.

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Jacob Wolinsky is the founder of, a popular value investing and hedge fund focused investment website. Jacob worked as an equity analyst first at a micro-cap focused private equity firm, followed by a stint at a smid cap focused research shop. Jacob lives with his wife and four kids in Passaic NJ. - Email: jacob(at) - Twitter username: JacobWolinsky - Full Disclosure: I do not purchase any equities anymore to avoid even the appearance of a conflict of interest and because at times I may receive grey areas of insider information. I have a few existing holdings from years ago, but I have sold off most of the equities and now only purchase mutual funds and some ETFs. I also own a few grams of Gold and Silver
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