BUSINESS FINANCE Research Paper Example | Topics and Well Written Essays - 2250 words

BUSINESS FINANCE - Research Paper Example Rajaratnam was entitled by the Forbes magazine as the self-made billionaire hedge fund manager and was also the 235th America’s richest men in the year 2009. As on 2009, the total net worth of Rajaratnam was over $1.88 billion. Thus, he was the richest Sri Lankan born entity in the world. He started his career business loan specialist to technology firms was working as the lending officer of Manhattan Bank. Then in the year 1985, Rajaratnam joined Needham & Co. as investment banker a focused on consumer electronics industry. It is extremely astonishing as well as praise worthy fact that from here Rajaratnam was promoted as the head of research at Needham & Co. in the year 1987 (just in a span of two years). He was then promoted to President of Needham & Co. in the year 1991, at the age of only 34 years. When he was at the pinnacle of the company, Rajaratnam seeded his own hedge fund company that he initially named as the Needham Emerging Growth Company and then later renamed i t to Galleon. The hedge fund company Galleon was valued close to $4 billion in the year 2009, down from the peak value of $7 billion in the year 2008. According to the annual report of Galleon for the year 2009, the diversified hedge fund company had over 22% compounded annual returns since its inception. One of the reason for the company’s tremendous success and peak valuation for the year ending 2008 was the sudden collapse of Lehman Brothers. and global financial crisis that encouraged firms to adapt aggressive hedging strategy. From the financial statements of the company from the year 2000 to 2008, it can be said that Rajaratnam invested primarily in pharmaceutical and technology sectors. The basic reasons behind such investment strategy could be: one, seeking growth of income as objective and two, both the sectors are defensive and export oriented. Rajaratnam was very knowledgeable to realize the importance of technology sector in future and so he knew that by investing in technology stocks at present would maximize shareholders’ wealth in future due to capital appreciation of the stocks. The demand for drugs and medicines on the other hand will always persist and probably increase in future with the rise in population. According to one of the face to face interviews by Rajaratnam, he said that the best ideas are outcomes of frequent visits to companies in which his company invested and also from regular conversations with the hedge fund managers. In the year 2009, Rajaratnam along with five others were charged and arrested for insider trading and multiple frauds conviction. The founder of Galleon fund, Rajaratnam pleaded that he was not guilty and paid $100 million bail to remain free (which was the largest bail amount in the history of United States). But in May 2011, a US district court found Rajaratnam guilty and then on October 2011 he was sentenced to 11 year imprisonment by the US district judge Richard Holwell. Other current and former traders of Galleon were charged and arrested with allegation of involvement in insider trading activity and alleged conspiracy. It is important to mention that several former employees of the organization cooperated in the investigation process. It was also reported in media that as of January 2012, over 50 people were either convicted or pleaded guilty from the Galleon hedge fund scandal (Hristova, 2012, pp.1-3). Overview of Insider Trading The Galleon insider trading case was one of