Hedge fund boss loses NY bid to stay free during appeal

Posted Dec. 01, 2011, at 9:38 p.m.

NEW YORK — A New York City court has denied a hedge fund founder’s long-shot bid to remain free pending appeals of his insider trading conviction and 11-year prison sentence.

The 2nd U.S. Circuit Court of Appeals in Manhattan denied the request Thursday after hearing arguments a day earlier. The 54-year-old Sri Lanka native Raj Rajaratnam was sentenced in October to the longest prison sentence ever to result from an insider trading case. He is scheduled to report to prison Monday. He had asked for leniency because of health problems.

The prosecution of the insider trading case resulted in convictions of more than two dozen people. Prosecutors say Rajaratnam made more than $70 million in illegal profits in trades between 2003 and 2009. The one-time billionaire founded the Galleon Group of hedge funds.

Feds filed charges in Mass. in penny stock probe

BOSTON — Federal authorities suspended trading by seven firms and filed criminal charges Thursday against corporate executives, lawyers and stock promoters who allegedly used fraud to spur investments in small companies known as penny stocks.

The federal action was the latest is a yearlong investigation by the U.S. Attorney’s Office in Boston to prevent fraud in stock markets for small publicly traded companies. Penny stocks are traded over the counter rather than on a major exchange.

The criminal case filed in U.S. District Court named 13 defendants from 10 states, accused of agreeing to pay kickbacks to an undercover FBI agent they believed was an investment fund representative in exchange for having his purported firm buy stock in certain companies. Most of those named face charges of mail fraud, wire fraud, and conspiracy to commit securities fraud.

In conjunction with the criminal case, the Securities and Exchange Commission suspended seven firms that allegedly participated in the kickback-for-investment scheme. Also, the SEC filed a lawsuit against four people the commission says engaged in securities fraud by using kickbacks to manipulate trading in “microcap,” or penny stocks.

The seven firms suspended were: 1st Global Financial Inc. of Las Vegas, Augrid Global Holdings Corp. of Houston, ComCam International Inc. of West Chester, Pa., MicroHoldings US Inc. of Vancouver, Wash., Outfront Companies based in Florida, Symbollon Corp./Symbollon Pharmaceuticals Inc. of Medfield, Mass., and ZipGlobal Holdings Inc. of Hingham, Mass.

Senate panel weighs congressional insider-trading ban

WASHINGTON — Senators said at a hearing Thursday that Congress should quickly pass a bill that clearly prohibits its members and their staffs from trading stock based on nonpublic information they gather on Capitol Hill.

In a two-hour hearing before the Homeland Security and Governmental Affairs Committee, members and witnesses said swift action was necessary because the public’s faith in Congress is at “an all-time low.”

“When the faith ebbs, as it now has to historic lows, we must increase our efforts to ensure that people who did us the honor of sending us to Washington can be confident that our only business is their business,” committee Chairman Joseph Lieberman, I-Conn., said in his opening statement.

“The fact is America doesn’t trust you,” Melanie Sloan, executive director of Citizens for Responsibility and Ethics in Washington, told the Senate panel.

Two Senate bills and a House bill, known as the Stop Trading on Congressional Knowledge, or STOCK Act, would prohibit trades based on information that could come from private meetings, briefings and phone calls on the Hill. The bills also would dramatically change the financial disclosure process.

The proposed legislation calls for members to report their trades within 90 days. Several senators pressed for the information to be disclosed in a searchable, online database, something government watchdogs have unsuccessfully sought for nearly a decade.

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