Hedge Fund Managers Agree To Testify Against Rajaratnam In Exchange For Leniency

HedgeCo News - Two ex-Galleon hedge fund managers pleaded guilty yesterday to insider trading. Adam Smith agreed to testify against Galleon hedge fund founder Raj Rajaratnam in exchange for protection from prosecution for other crimes.

Michael Cardillo also pleaded guilty to the same charges. The ex-hedge fund managers agreed to give up any money they made, and Cardillo also agreed to testify against Rajaratnam next month. Smith and Cardillo could face up to 20 years in prison on the securities fraud counts.

Rajaratnam's co defendant Danielle Chiesi also pleaded guilty last week. She was accused of receiving insider information from Robert Moffat, Jr., who also pleaded guilty in the Galleon hedge fund fraud scheme.

Rajaratnam was taken into custody in New York on Oct. 16, 2009 in what is being called the USA’s largest hedge fund insider-trading scheme. He is being accused of insider trading and securities fraud, generating as much as $49 million in profit. The majority of the stocks involved are in technology, including, IBM, Intel, Akamai Technologies Inc, Polycom Inc, Hilton Hotels Corp, Google Inc, Sun Microsystems Inc SUNW.TI, Clearwire Corp, Advanced Micro Devices, ATI Technologies Inc and eBay Inc.

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Chiesi Pleads Guilty Ahead Of Rajaratnam/Galleon Hedge Fund Trial

HedgeCo news - Danielle Chiesi has pleaded guilty at a plea proceeding in U. S. District Court located in New York. She was accused of receiving insider information from Robert Moffat, Jr., who also pleaded guilty in the Galleon hedge fund fraud scheme.

From August to October 2008, Moffat got insider information relating to IBM, Advanced Micro Devices, Inc. (AMD) and Lenovo Group Ltd. (Lenovo), providing the insider information to to Chiesi, hedge fund founder Raj Rajaratnam’s co-defendant. She worked for New Castle Partners, an equity hedge fund group affiliated with JPMorgan Chase & Co.

The court documents reveal that in September 2008, Moffat provided Chiesi with information relating to IBM’s and Lenovo’s performance in the companies’ respective fiscal quarters ending in September 2008.

Chiesi and Rajaratnam were arrested in October 2009. Her guilty plea comes a month before Rajaratnam goes on trial.

Hedge Fund Tax Alert: Reporting of ‘Specified Foreign Financial Assets

New York (HedgeCo.net) – U.S. taxpayers with ownership in foreign hedge funds, investments and assets may be affected by the Foreign Account Tax Compliance Act (“FATCA”), which was included as part of the 2010 Hiring Incentives to Restore Employment (“HIRE”) Act, according to hedge fund adviser Decosimo.

Hedge fund managers may need information on related costs and penalties associated with noncompliance.

A short summary of the key points are:

* WHO is subject: individuals (but may be expanded to entities by regulations).

* WHAT is subject: any “specified foreign financial asset” which includes foreign bank or securities, accounts, any stock or security issued by a non-US person, any financial instrument or contract held for investment where the issuer or counterparty is a non-US person and any interest in a foreign entity with total value of all accounts of $50,000 or more.

* WHEN is effective date: Tax filing year 2011 for most individuals.

* WHERE is this reported: Form 1040 package (specific form not yet drafted).

* WHY should taxpayers comply: potential penalties are substantial and statute of limitations may be involuntarily extended.

Full Alert Here: Reporting of ‘Specified Foreign Financial Assets’ (22KB)

Hedge Fund Fraud: iPod Leaking Executive Makes Bail

HedgeCo.net - Three of the research executives arrested by the FBI in December have been granted bail, including the man who allegedly leaked details about the iPad to a a hedge fund.

James Fleishman, from Primary Global Research, Mark A. Longoria, from Advanced Micro Devices, Walter Shimoon, from Flextronics International, and Manosha Karunatilaka from Taiwan Semiconductor Manufacturing, are accused of selling confidential information to hedge funds.

Along with travel restrictions, Reuters reports that Shimoon's bail was set at $150,000, Longoria's at $50,000 and Fleishman's bail was set at $700,000.