Rajaratnam Brother’s Trial Opens With Wiretaps

Jun 19 2014 | 10:46am ET

Insider-trading was a family affair at Galleon Group, prosecutors told the jury at the opening of the trial of the firm’s founder’s brother.

Rengan Rajaratnam is accused of conspiring with his brother, Raj, convicted in 2011 of fraud, to obtain and trade on confidential information about technology stocks. Rengan has denied any wrongdoing.

As with Raj’s trial three years ago, prosecutors are expected to lean heavily on wiretapped phone calls involving the two men. “Their own words will show you unmistakably and clearly their decision to commit insider trading,” Assistant U.S. Attorney Christopher Frey said before playing excerpts of two such conversations from 2008, having won permission from U.S. District Judge Naomi Reice Buchwald earlier in the day.

“I just heard that… AMD had a handshake with the… Arabs to put in $6 billion,” Raj is heard saying, referring to Advanced Micro Devices. Raj told his younger brother that he was “buying 250,” or 250,000 shares, “for you,” earning a thanks from Rengan, who said, “I appreciate it.”

Rengan’s lawyer, Daniel Gitner, said the evidence proves that the two didn’t share information and trade on it. On AMD, for example, Raj bought up 12 million shares, while Rengan sold all of his.

“These brothers weren’t joined at the hip,” he insisted. “They were on different planets when it comes to AMD. On every turn, Rengan’s actions show that Rengan didn’t know what Raj knew.”

Gitner also previewed a key facet of the defense: That Rengan’s alleged actions don’t constitute insider-trading because it cannot be shown that he knew that his tipsters were receiving a personal benefit for their actions. Prosecutors objected, but Buchwald sided with Gitner: “That’s the law,” she said.

While Buchwald allowed the tapes in, she barred prosecutors from mentioning that Raj had been convicted of similar crimes. “Just because his brother is guilty, it doesn’t mean the defendant is guilty,” she said.

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