Monday, 30 November 2015
Last updated 2 days ago
Nov 29 2010 | 10:42am ET
Galleon Group founder Raj Rajaratnam and former New Castle Partners executive Danielle Chiesi may yet beat the insider-trading charges against them. But their path to acquittal got a good deal bumpier last week after a judge rejected their bid to throw out the wiretaps at the center of the government case against them.
U.S. District Judge Richard Holwell agreed with the defendants' legal teams that prosecutors failed to disclose a prior Securities and Exchange Commission probe of Rajaratnam, which he called "troubling to say the least." But the judge also ruled that even if they had disclosed the SEC investigation, it "would ultimately have shown that a wiretap was necessary and appropriate."
In particular, Holwell said that prosecutors had hidden or misstated facts about Roomy Khan, their star witness. Khan is a former Galleon employee who allegedly passed tips to Rajaratnam while working at Intel Corp., and has a previous insider-trading conviction.
"While the SEC investigation used conventional techniques and was the bedrock of the prosecutor's own criminal investigation, the SEC investigation had nevertheless failed to fully uncover the scope of Mr. Rajaratnam's alleged insider-trading ring and was reasonably unlikely to do so because evidence suggested that Rajaratnam and others conducted their scheme by telephone," Holwell ruled.
The ruling is a major blow to Rajaratnam and Chiesi, who have pleaded not guilty in a case that has already netted more than a dozen guilty pleas. For one, the admission of the approximately 2,400 recorded conversations will hamper their lawyers' efforts to keep out testimony by some of the people on those tapes, among them several cooperating witnesses who have already pleaded guilty.
Holwell's ruling also makes it likely that Rajaratnam and Chiesi will have to turn the wiretaps over to the SEC, which is suing both in a parallel case. A federal appeals court in September overturned an earlier order by the judge overseeing that trial, telling the SEC it would have to wait until Holwell's ruling on the legality of the wiretaps in the criminal case.
It was bad day in court all around for Rajaratnam and Chiesi. Holwell granted a request by the defendants seeking separate trials—but limited that to conspiracy counts against only one or the other. Holwell suggested that he'd still like to try the two together on counts where they are both accused, and asked lawyers for their proposals.
Oct 21 2015 | 10:41am ET
One of the most unique charity benefits in the hedge fund industry, A Leg To Stand On's (ALTSO's) Hedge Fund Rocktoberfest - NYC, raised nearly $500,000 last Thursday thanks to the generous support of major sponsors and nearly 1,400 attendees from the Tri-State finance, business and hedge fund communities. Read more…