Rajaratnam Brother To Face What’s Left Of Case Against Him

Jun 16 2014 | 8:33am ET

Federal prosecutors will put their perfect record in recent insider-trading cases to the test beginning tomorrow as they seek to reunite Galleon Group founder Raj Rajaratnam and his younger brother behind bars.

Jury selection in Rengan Rajaratnam’s fraud trial begins tomorrow, and may be the government’s toughest test to date in a criminal case. To begin with, the original seven charges against the younger Rajaratnam have been whittled to three, after the judge in the case questioned the basis of some of the others. In addition, it is the first insider-trading trial since a federal appeals court questioned the insider-trading theory behind a number of recent convictions.

Certainly, Rajaratnam, who is accused of illegally trading shares of Clearwire Corp. and Advanced Micro Devices while working with his brother at Galleon, appears confident, in spite of prosecutors’ unblemished record and the 11-year sentence his brother is serving: He returned to the U.S. from Brazil to face the charges, and prosecutors said last month that he had rejected a plea deal.

Some of the wiretapped phone calls used against the elder Rajaratnam will now be used against his brother: Prosecutors say they plan to play 11 recordings that show Rengan Rajaratnam’s “knowledge and intent regarding the manipulation of corporate insiders.” But the recordings do not deal with either of the companies whose shares he is alleged to have illegally traded.

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