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Rajaratnam Said to Speak to Staff as Investors Seek Withdrawals

Date: Tuesday, October 20, 2009
Author: Katherine Burton and Saijel Kishan, Bloomberg.com

Raj Rajaratnam came to work at his Galleon Group hedge fund firm this morning, gathering employees for a speech and telling them he is innocent even as investors sought redemptions from the $3.7 billion hedge fund firm, according to three people familiar with the matter.

Rajaratnam, arrested on Friday for alleged insider-trading and released on $100 million bail, said he will fight the charges, according to two people familiar with his speech who asked their names not be used because the comments were private. Rajaratnam also sent a letter to investors and employees reiterating the message.

“I am entirely innocent and will vigorously defend myself and our firm,” Rajaratnam, 52, said in the letter. “As I move forward on my defense, I want to assure you that our commitment to our investors and employees will remain unwavering.”

Redemption requests totaled $1.3 billion, the Wall Street Journal reported earlier today. Retaining clients and top managers may prove challenging as Rajaratnam fights the charges. The case against Rajaratnam, built on recorded conversations among a web of alleged participants, is part of a planned crackdown on insider trading that has been more than two years in the making, people familiar with the investigation said today.

“I suspect the super majority of assets will be redeemed,” said Ron Geffner, a lawyer at the New York-based Sadis & Goldberg LLP, whose clients include hedge funds. “Certain portfolio managers and traders who have strong relationships with investors will find this an opportunity to start their own firms, or join other firms with assets in tow.”

Investors in Galleon include Rochdale Investment Management LLC and Colgate University.

The Colgate University endowment portfolio has invested with Galleon since 2005, said Anthony Adornato, who wouldn’t disclose the Hamilton, New York-based university’s prospective investment decision, saying only that it was actively monitoring the situation. A call to Garrett D’Alessandro, chief executive of New York-based Rochdale, wasn’t immediately returned.

To contact the reporters on this story: Katherine Burton in New York at kburton@bloomberg.net; Saijel Kishan in New York at skishan@bloomberg.net.