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Source: Reuters -
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A Sri Lankan-born billionaire's arrest in the largest US hedge
fund insider trading case triggered new scrutiny in his native
country over the possibility his money found its way to the Tamil
Tiger rebels.
US authorities on Friday charged Raj Rajaratnam, the 52-year-old
founder of the Galleon Group hedge fund, and others with making up
to $US20 million in illegal profits through a network of secret
informants.
The arrest sent ripples through Rajaratnam's native Sri Lanka,
where he is at once viewed with admiration for his success and
suspicion because of at least $US5 million US records show he gave
to the Tamil Rehabilitation Organization (TRO).
Rajaratnam has not been charged with any crime in Sri Lanka, nor
has the United States charged him in the case of the TRO.
The TRO's funds were frozen in both countries after they were found
to have been channelled to the separatist Liberation Tigers of
Tamil Eelam (LTTE), defeated by the army in May to end a 25-year
war.
But both the central bank, responsible for tracking financial
crimes, and the Sri Lankan Securities and Exchange Commission said
they were probing Rajaratnam and his dealings.
"The TRO investigations are continuing. It's not clear yet. The
involvement of the Galleon fund with funding the TRO is also being
probed," Central Bank Governor Ajith Nivard Cabraal told Reuters in
Jaffna.
In a sign of Rajaratnam's influence on the Sri Lankan market,
either as an investor or through Galleon Group, the Colombo Stock
Exchange had its biggest intraday drop in five years before
recovering to close down 1.56%.
Higher economic growth hopes, more market liquidity, a $US2.6
billion International Monetary Fund loan, an upgraded rating
outlook and foreign inflows have all boosted investor confidence
since the end of the war.
Foreign ministry provided intelligence
details
The Sri Lankan foreign ministry had passed an intelligence dossier
on Rajaratnam to US authorities in 2007, around the time the TRO
was being investigated by the US Treasury, two Sri Lankan officials
familiar with the matter said.
The United States, Sri Lanka and Britain all have put the
now-defeated LTTE on their banned terrorist organisation
lists.
The Sri Lankan stock market regulator said it had no suspicion of
any untoward dealings by Rajaratnam in its market, but said it
would investigate his trades nonetheless.
"We are looking at his recent transactions closely. Given what has
unfolded in the US, in light of that, we want to look at his
positions here," Sri Lankan Securities and Exchange Commission
Director-General Channa De Silva said.
The Galleon Group has had as much as $US7 billion in assets under
its control.
By comparison, the total value of outstanding shares on the
Colombo Stock Exchange was $US8.63 billion on Monday.
Rajaratnam's arrest in the insider trading case renewed earlier
questions about possible links he may have had to the Tamil
Tigers.
Rajaratnam has long denied any involvement with the LTTE, which
operated extortion and fundraising networks that brought in an
estimated $US200-300 million annually at their peaks.
The Wall Street Journal this weekend reported that federal agents
had identified Rajaratnam as Individual B in the indictment against
the US head of the LTTE.
The indictment quotes letters among LTTE officials saying
Individual B had a long-lasting desire to meet and discuss with the
national leader," in reference to LTTE founder Vellupillai
Prabhakaran, killed in the final days of the war.
However, a Sri Lankan military intelligence official said on
condition of anonymity that Rajaratnam had a very cordial
relationship with the present government.
Last month, he pledged $US1 million to help rehabilitate former LTTE fighters.
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