Posted by: Mehul Srivastava on October 20, 2009
Here in India, newspapers are following the Galleon hedge fund insider trading scandal with just a little bit of relief - “Thank god,” you can read between the headlines. “He’s not Indian.”
Raj Rajaratnam, the Sri Lankan-born billionaire who ran the Galleon Group, a New York-based hedge fund, was arrested Oct. 16 by federal prosecutors for insider trading. Five of his colleagues and friends were also arrested - prosecutors for the SEC and the New York Attorney General’s office say they too were involved.
In India, where successful immigrants to the west are celebrated (think Indra Nooyi, the PepsiCo CEO and Chairman, Nobel Prize winners Amartya Sen and Venki Ramakrishnan), the list of his alleged collaborators did bring some bad news: Anil Kumar, McKinsey director and a member of the board of one India’s top business schools, the Hyderabad-based Indian School of Business, had his name dragged in. Kumar denied the charges, but for the while being, it looks like he has stepped down from the prestigious board seat at ISB. Rajiv Goel, who is a director of strategic investments at Intel Capital, also made the list.
But Rajaratnam’s Indian connections spread even somewhat further, it would appear. The Economic Times, citing unnamed sources, rounded up the list of Indian investments at Galleon, and well-known companies like Edelweiss Capital, and almost completely unknown companies like Pipavav Shipyard. Both stocks took a pounding when the markets opened Tuesday - Pipapav fell as much as 16% - but ended the day not so badly hurt, down a couple of percentage points on a volatile day in the Bombay Stock Exchange.
In tiny Sri Lanka, though, the impact has been more widespread. The Colombo stock exchange-listed companies have a pretty small combined market cap, the estimated $150 million that Galleon invested in Sri Lanka made up a sizeable investment in Sri Lankan blue chips. The markets fell 1.6% by the end of trading on Tuesday, and companies in which Galleon held a stake bounced around much of the day. Few of the companies in which he is reported to have investments, including Commercial Bank of Ceylon and DFCC Bank, returned calls to reporters on Tuesday about the future of the pretty sizable stakes (close to 5%) that Galleon holds in those companies.