Rajaratnam Says New Insider-Trading Allegations ‘Unfair’

Apr 19 2010 | 1:07pm ET

Lawyers for Raj Rajaratnam asked a judge to junk new allegations that nearly double the number of stocks that the Galleon Group founder is accused of trading illegally.

In a letter to U.S. District Judge Richard Holwell, John Dowd said the new allegations “effectively triple the size of this case some six months after its inception” and should be excluded from the trial. Last month, prosecutors told Dowd that it was adding 10 stocks to the list of those Rajaratnam and his alleged insider-trading circle were alleged to have dealt in, including AT&T Inc., Cisco Systems, Clear Channel and Goldman Sachs.

“The government’s inexplicable delay in disclosing these allegations has left Mr. Rajaratnam with insufficient time to prepare for trial, and creates a severe risk that Mr. Rajaratnam will be convicted of charges at variance with those actually returned by the grand jury,” Dowd wrote.

Dowd blasted prosecutors for “an unfair and prejudicial attempt to ambush Mr. Rajaratnam,” and pointed out that the government two months ago “represented to the court that the parties could be ready for trial in June.” The trial of Rajaratnam and his co-defendant, former New Castle Partners executive Danielle Chiesi, is set to begin in October.

Meanwhile, prosecutors are continuing to add to the allegations against the hedge fund billionaire. In a court filing on Friday, the government says that Rajaratnam sought confidential information about Berkshire Hathaway’s purchase of preferred Goldman Sachs shares in 2008.

The Galleon chief “conspired to obtain material, nonpublic information” about both the Berkshire buy and the firm’s quarterly earnings that year. Rajaratnam has denied the charges.

Prosecutors are reportedly investigating a Goldman director, former McKinsey & Co. chief Rajat Gupta, as Rajaratnam’s potential source at the Wall Street giant. Gupta announced last month that he would not stand for reelection to Goldman’s board, prior to his identification as a possible Rajaratnam tipster.

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