Rajaratnam trial continues

Jurors in the trial against Wharton alumnus Raj Rajaratnam heard tapes on March 10 of recorded conversations between Rajaratnam and those who allegedly supplied him with insider trading information, according to a New York Times article.

The investigation against Rajaratnam is the largest investigation of hedge-fund insider trading in United States history, according to a March 9 Bloomberg Businessweek article.

About 2,400 conversations obtained through government wiretapping were first admitted as evidence on Nov. 24, 2010.

It is the first time such evidence has been used in a wiretapping case, according to Businessweek.

According to The New York Times, the sound quality of the tapes was “excellent,” and the jury was able to follow along with supplemented transcripts of the conversations.

Even though the use of wiretapping in national security cases has become a political debate since the passage of the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism (USA PATRIOT) Act in 2001, it was allowed into this case amidst little controversy.

Presiding United States District Judge Richard J. Holwell stated in a court order that suppression of the wiretapped evidence is not required because “the affidavit demonstrated ample reason to find probable cause” within the recordings.

The attorneys representing Rajaratnam, who received a Wharton School MBA in 1983 and co-founded hedge-fund management firm The Galleon Group, claimed that the defendant relied on newspaper articles, research reports and his company’s analysis to trade in the market, according to Businessweek.

Defense attorney John Dowd told jurors “the government has it wrong” the day before the jury actually heard the tapes.

He stated that the prosecution “didn’t do their homework” and tried to convince the jury that the accusers only focused on “snippets” of the conversations to build their case.

Rajaratnam, 53, is the defendant in a criminal trial against him and a civil suit filed against Galleon.

He is being accused of several accounts of securities fraud, including conspiracy to defraud the U.S. and “manipulation and deception,” according to court documents.

The prosecution maintains that Rajaratnam, a billionaire, made $45 million illegally through insider knowledge.

Rajaratnam, if found guilty of fraud, could spend as long as 20 years in prison. He pleaded not guilty on Dec. 21, 2009.

The case was first filed on Oct. 15, 2009, and Rajaratnam was arrested by the Federal Bureau of Investigation the following day.

The key evidence the prosecution is using to implicate Rajaratnam is a set of recordings of conversations the defendant had with Galleon colleague Adam Smith and close friends Anil Kumar and Rajiv Goel.

Kumar is a former partner at McKinsey & Company, and Gobel is a former Intel employee. Both are also 1983 Wharton MBA graduates.

The two pleaded guilty to engaging in insider trading with Rajaratnam earlier last year.

Note: This article was updated to clarify that Rajaratnam is an MBA graduate.

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