Whitman Insider Trading Trial Opens

Aug 1 2012 | 2:28am ET

The insider-trading trial of hedge fund manager Doug Whitman got under way yesterday, with prosecutors telling the jury that the Whitman Capital Management founder traded on confidential information—and Whitman's lawyers telling them otherwise.

Whitman and "his partners in crime decided the rules of stock-trading did not apply" to them, prosecutor Christopher LaVigne told the jury in the case, which was also picked yesterday. LaVigne said that Whitman had traded illegally the stocks of a number of technology companies that he received "sneak peaks" about from three co-conspirators—all of whom are cooperating with the government and will testify against Whitman.

Whitman's lawyer, David Anderson, countered that the three cooperators are "criminals and liars" who agreed to testify to save their own skins. "They are desperate people making false accusations," he said. In particular, he hammered at Roomy Khan, a former Intel Inc. and Galleon Group employee, who has pleaded guilty to insider-trading charges twice, including as part of the Galleon case.

"Khan has never been held to account for her crimes," Anderson said. "She has never been held to account for her lies. She's hoping you convict Mr. Whitman so she can remain free."

Anderson also said that his client "did not pay or corrupt anyone for inside information."

The 15 members of the jury—there are three alternates—include five teachers. But it does not include several people with ties to investment banks, people who said they distrusted "Wall Street in general," and U.S. District Judge Jed Rakoff's own daughter.

Rakoff, who is presiding over the trial, joked that he hoped she would have been selected, as it "would be the first time ever that she followed the court's instructions."

Whitman allegedly made almost $1 million in illegal profits. He faces up to 25 years in prison if convicted.

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