Chiesi Talks Deal On Statements, Galleon Trial Delayed Again

Jul 28 2010 | 1:32pm ET

Danielle Chiesi, the former hedge fund executive and insider-trading co-defendant of Galleon Group founder Raj Rajaratnam, may be mulling a deal with prosecutors.

Prosecutors yesterday said that they were discussing a “possible resolution” of Chiesi’s allegation that she hadn’t been notified of her constitutional right against self-incrimination on the morning of her arrest last year. The former New Castle Partners executive is seeking to have some statements she made to the arresting Federal Bureau of Investigation agents before being given the Miranda warning suppressed.

The government has opposed Chiesi’s bid to throw out the statements.

But if the two sides could reach a deal on the statements, it is possible that they could reach a deal on Chiesi’s cooperation, an option she rejected on the morning of her arrest in October. The arresting FBI agents asked her to wear a wire; Chiesi refused.

But Chiesi’s lawyer, Alan Kaufman, said there was no link between a deal on the statements and a deal on cooperation. “There’s no additional meaning to it,” he told The Wall Street Journal, adding that the two sides are not talking about a settlement.

If convicted, Chiesi faces up to 155 years in prison.

Also yesterday, U.S. District Judge Richard Holwell once again rescheduled the trial and heard arguments on the legality of the wiretaps at the center of the government’s case against Chiesi and Rajaratnam.

Holwell delayed an evidentiary hearing, originally scheduled for tomorrow, until September, and pushed the start date of the trial from October to Jan. 17. That could once again throw into doubt the start of the civil trial against the two accused insider-traders, which is currently scheduled for Feb. 14. U.S. District Judge Jed Rakoff, who is presiding over that trial, has proven loathe to delay that case, and it is unclear if he would push its start date back even further.

Holwell moved his trial’s start date at the request of both sides, who say they need more time to prepare.

Meanwhile, both sides presented their arguments on the wiretaps. Rajartanam’s lawyers took aim at the FBI agent who sought the wiretap authorization arguing he misled the judge about the reliability of key government witness and former Rajaratnam associate Roomy Khan. Kaufman argued on behalf of Chiesi that the government was too quick to seek the wiretaps.

“You cannot conduct a legitimate insider-trading investigation in two weeks,” he told Holwell.

Prosecutors dismissed those allegations.

“Mr. Rajaratnam’s argument that there is some kind of subterfuge here belies common sense,” Reed Brodsky, an assistant U.S. attorney, said.

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