UPDATE: Galleon's Rajaratnam, Others Charged In Insider Case

Galleon Group founder Raj Rajaratnam and five others have been arrested and charged in an $20 million insider-trading case, prosecutors said.

According to court documents, Rajaratnam, the founder of the $7 billion Galleon Group and portfolio manager for the Galleon Technology Funds, has been charged with four counts of conspiracy and eight counts of securities fraud.

Others charged criminally in the case include Rajiv Goel, director in strategic investments at Intel Corp.'s (INTC) investment arm; Anil Kumar, a director at global management-consulting firm McKinsey & Co.; Danielle Chiesi and Mark Kurland of New Castle Partners LLC, the one-time equity hedge fund group at Bear Stearns Asset Management Inc.; and Robert Moffat, a senior vice president at International Business Machines Corp. (IBM).

A call to Galleon Group wasn't immediately returned Friday.

Preet Bharara, the U.S. Attorney in Manhattan, is expected to discuss the case in more detail at a press conference at 1 p.m. EDT Friday.

The allegations put Rajaratnam at the center of several insider trades in which he allegedly caused Galleon funds to act on inside information or passed along tips to others.

In one instance, prosecutors allege that Rajaratnam, between January 2006 and July 2007, received nonpublic information about Polycom Inc. (PLCM), Hilton Hotels Corp. and Google Inc. (GOOG) and caused Galleon Technology Funds to make improper trades on that information. As a result, the Galleon fund earned more than $12.7 million, prosecutors said.

In another instance, Chiesi, the New Castle employee, allegedly received inside information regarding Akamai Technologies Inc. (AKAM) and Advanced Micro Devices Inc. (AMD) from an Akamai executive and Moffat, the IBM executive, prosecutors said.

She allegedly passed the information to Rajaratnam, who allegedly provided her with information regarding AMD and other publicly traded companies, the government said.

As a result of information Chiesi received from Rajaratnam, Moffat and others, New Castle earned a profit of more than $2.4 million, prosecutors said.

-By Chad Bray, Dow Jones Newswires; 212-227-2017; [e-mail]