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Motley Rice hit with RICO lawsuit by jailed ex-billionaire it accused of funding terrorism

Lawsuits

By Daniel Fisher | Jun 26, 2018


BROOKLYN, N.Y. (Legal Newsline) - Six days after the FBI arrested billionaire Raj Rajaratnam on insider-trading charges in October 2009, lawyers at Motley Rice hit him with their own charge: Financing terror. In a lawsuit filed in federal court in New Jersey, the law firm famous for its $1 billion fee in the 1998 tobacco settlement accused Rajaratnam, an ethnic Tamil who founded the Galleon Group of hedge funds, of contributing millions of dollars to a charity that financed the vicious Tamil Tigers terrorism group.

It is one of several lawsuits Motley Rice attorney Michael Elsner has launched against international banks, the Saudi government and other entities on behalf of terror victims. The cases have generated headlines but mixed success in the courts. 

Elsner’s long-running lawsuit against Jordan’s Arab Bank on behalf of foreign victims of Palestinian terror groups ended in April, for example, when the U.S. Supreme Court rejected the idea foreign plaintiffs can use the Alien Tort Statute to sue overseas banks in U.S. courts.

Elsner may have thought Rajaratnam was an easier target, since he was in the midst of a losing battle against criminal charges based on his Wall Street career. Now serving an 11-year sentence in federal prison, Rajaratnam has refused to back down on the civil accusations of terror finance, however, saying his contributions were to the Tamil Rehabilitation Organization. a Maryland charity that also drew hundreds of millions of dollars from foreign governments. Rajaratnam says he stopped contributing to TRO when the U.S. Treasury designated the group a terror front. 

Earlier this month, Rajaratnam filed a lawsuit against the lawyers suing him, accusing Motley Rice of hiring former government agents and using illegally obtained information to assemble the case against him. It’s a long-shot gamble in a legal fight that Rajaratnam says has already cost him more than $3 million, but his claims reveal the extraordinary methods Motley Rice has employed to build its terrorism cases, as well as the law firm’s strenuous efforts to prevent them from being made public.

In the 54-page complaint filed June 1, Rajaratnam also accuses Motley Rice of being behind a critical Vanity Fair article in September 2011 that painted the Sri Lankan immigrant as a terrorism funder without telling readers the main sources for the story were on the law firm’s payroll. 

The details of how Motley Rice hired former FBI agents and obtained information from a confidential government informant have emerged slowly and in heavily redacted form as Rajaratnam’s lawyers have won court orders forcing the law firm to disclose its sources and methods in the lawsuit. 

Among the thousands of pages of documents is a transcript that contradicts pro-terrorist quotes an informant code-named “Rudra” attributed to Rajaratnam in the in the Vanity Fair article, “Crouching Tiger, Hidden Raj.” That article has since been removed from the Vanity Fair website. 

Elsner, in a statement, said “we are proud of our work seeking to hold alleged financiers of terrorism accountable. The accusations leveled by Rajaratnam are meritless and are simply a weak attempt to distract us from pursuing justice for our clients.”

Rajaratnam’s lawyer, Jonathan Lupkin of Lupkin PLLC, said the lawsuit speaks for itself and declined further comment.

Rajaratnam has never been charged with financing terrorist organizations. Motley Rice nevertheless sued him over the millions of dollars he contributed to TRO before the U.S. government ordered it shut down. Motley Rice represents Sri Lankan victims of terror attacks by the Tamil Tigers, who invented the gruesome tactic suicide bombing as part of a long and ultimately futile separatist campaign. 

Less than a week after the FBI arrested Rajaratnam, the lawsuit says, “Motley Rice pounced.”

“No doubt assuming Mr. Rajaratnam would not be able or willing to defend himself in a civil suit while distracted by the insider trading case,” the lawsuit says, Motley Rice sued the onetime billionaire and his father, now deceased. The law firm’s “initial gambit failed,” however: “Despite being consumed by his defense of the insider trading prosecution, Mr. Rajaratnam vigorously defended himself against Motley Rice’s false allegations.”

That vigorous defense has included a blizzard of motions seeking to unveil the sources behind Motley Rice’s allegations. Documents unsealed over Motley Rice’s objections show the firm hired former FBI agents Jayat P. Kanetkar and John “Hank” Allison and Brian P. Mallon, a former U.S. Immigration and Naturalization Service official, as “consultants” to help prepare terror lawsuits against Rajaratnam and others.

“Once Motley Rice was forced to reveal their identities, it became apparent Motley Rice had not hired these men for their investigative prowess, but rather for the information they had obtained while working for the U.S. government,” the lawsuit says. The former agents had investigated the Tamil Tigers up until 2006, when Motley Rice hired them, giving them “secret government information” on criminal investigations that paralleled the allegations in the civil lawsuit against Rajaratnam.

Further disclosures revealed Motley Rice had paid an unnamed “confidential informant,” whom Rajaratnam’s lawyers believe to be “Rudra,” $40,000 to fund living arrangements, consumer goods and travel. “Such payments to a witness are prohibited by law,” the lawsuit says.

While Motley Rice has urged the court to protect the identity of “Rudra” from the defendants and the public, Rajaratnam’s lawyers say, the confidential witness himself doesn’t seem concerned about being exposed. Indeed, a redacted court filing shows “Anonymous Witness 1,” with his pseudonym blacked out, to be a prominent professor of security studies at a university in Singapore. 

In his lawsuit, Rajaratnam accuses Motley Rice of breaking the law by using confidential government information to pursue a civil lawsuit. The law firm has a history of hiring former government agents in terrorism cases and even formed a subsidiary, Rosetta Research and Consulting, with Mallon and Allison to gather information for a lawsuit it filed against the Kingdom of Saudi Arabia over the Sept. 11 attacks. 

That lawsuit is still pending years later, although the judge overseeing it has allowed discovery to proceed on the narrow issue of whether Saudi government officials in the U.S. provided financial support to some of the hijackers.

Rajaratnam accuses Motley Rice of establishing “a network that, through unsavory and often illegal means, gave Motley Rice lawyers unique – and unauthorized – access to information” that it used “to commodify `anti-terrorism litigation’ as they had with asbestos and tobacco cases.”

Justice Dept. guidelines prohibit the disclosure of human sources and require litigants to follow a specific court procedure to obtain confidential information being used in a criminal investigation. Motley Rice attorneys, in court filings, say those rules only apply to court-ordered disclosures and have no relevance to its hiring of former agents as advisors.

One of the most colorful allegations is that Motley Rice inspired the critical 2011 Vanity Fair article, including quotes “Rudra” said he heard when Rajaratanam spoke at a November 2002 meeting of Tamil supporters in New Jersey. The article quotes Rajaratnam as saying “we’re terrorists. We’re all freedom fighters,” and as the audience laughed, “They’re our terrorists, and you all must support the struggle.”

Amid the documents Motley Rice turned over to the defendants in 2016 is a transcript of the recording Rudra made of that event. While Rajaratnam discusses “our Tamil brethren... fighting a liberation battle” in Sri Lanka, none of the quotes from the Vanity Fair article appear in the transcript of the recording of his speech. 

Attorney Elsner, in his statement, said “we have spent years investigating and litigating on behalf of those injured and the family members of those killed, and we continue to pursue our clients’ claims against Raj Rajaratnam for his alleged funding of the Tamil Tigers — a designated foreign terrorist organization.”

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Organizations in this Story

Federal Bureau of Investigation (FBI) Motley Rice U.S. Department of the Treasury Vanity Fair

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