Judge OKs New Rajaratnam Charges, Defers Decision On Wiretaps

Jan 26 2010 | 7:06pm ET

The judge overseeing the Securities and Exchange Commission’s lawsuit against Galleon Group founder Raj Rajaratnam will allow the regulator to add charges that Rajaratnam paid for tips.

U.S. District Judge Jed Rakoff said yesterday gave the SEC permission to amend their complaint for a second time, but held off on deciding whether Rajaratnam and other defendants in the case should be forced to turn over wiretapped conversations from the criminal case against them.

Rakoff said he would rule on the wiretaps next week after hearing oral arguments yesterday. Federal prosecutors have asked the judge to force the defendants to provide 14,000 phone intercepts to the SEC. Rajaratnam lawyers have argued that the SEC lacks “any authority to obtain or use wiretaps as part of its civil enforcement efforts because the SEC is not a law enforcement agency empowered by law to conduct investigations or to make arrests, which is why the United States Attorney’s Office has not simply released the wiretaps to the SEC.”

The U.S. Attorney’s Office argues that it does have the authority to provide the wiretaps, which Rajaratnam’s lawyers say were obtained illegally.

But those lawyers will have to battle the allegations that Rajaratnam paid former McKinsey & Co. director Anil Kumar as much as $1.75 million for information about McKinsey clients. Kumar pleaded guilty to fraud charges earlier this month and is cooperating with authorities.

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