Rajaratnam trial rages on

The trial of Raj Rajaratnam, who received a Wharton School MBA in 1983 and is being accused of insider trading, continued in New York this past week with both sides taking unexpected approaches.

Presiding United States District Judge Richard Holwell told jurors that the trial, which began March 8, should go on for about two months.

Rajaratnam, 53 years old, is the defendant in a criminal trial and a civil suit filed against the Galleon Group, a hedge-fund management firm which he co-founded.

The investigation against Rajaratnam is the largest investigation of insider trading in U.S. history, according to prosecutors, who maintain that he made $45 million from illegally obtained insider knowledge.

The testimony of Anil Kumar has been a key focus of the trial over the past few days.

Kumar, a 1983 Wharton MBA graduate, is a former partner at McKinsey & Company. He and Rajaratnam were close friends and classmates, and Kumar allegedly supplied Rajaratnam with insider information.

Kumar pleaded guilty to conspiracy and fraud and is cooperating with the government in hope of a lighter sentence. He has also reached a $2.8 million civil settlement with U.S. market regulators.

Rajaratnam pleaded not guilty on Dec. 21, 2009, and has maintained his innocence since then.

Rajaratnam’s main defense lawyer, John Dowd, took what a March 19 article in The Wall Street Journal called an “offensive” and “aggressive” approach in cross-examining Kumar.

“When you got caught, you pinned it all on Raj, didn’t you?” Dowd asked, according to a transcript of the examination.

“You did what you could to get out of jail?” Dowd continued.

Dowd was nearly shouting at times, accusing Kumar of lying and taking payments from Rajaratnam out of envy, according to the article in WSJ. The article also speculated that this approach might cause jurors to sympathize with Kumar.

Dowd was not available for comment.

The defense was troubled by the description drawn by WSJ and saw the examination differently.

Rajdefense.org, a website run by public relations firm CounterPoint Strategies, posted a statement calling the article a “gross misrepresentation of the trial.”

The post said that Kumar “confessed to the fabrication of a false affidavit, a false doctor’s letter, false tax forms, false bank letters from HSBC from May to October 2008, and submitting them all to Galleon and to Morgan Stanley Fund Services — all to protect his original lie.”

In addition to attacking Kumar’s credibility, the courtroom defense has also been trying to prove that all of the information Rajaratnam received from sources was publicly available and that Rajaratnam and the Galleon Group had legitimate and legal reasons to purchase various stocks.

For instance, defense attorney Michael Starr tried to prove that sophisticated traders were able to predict Hilton Hotels’ takeover by Blackstone Group in 2007, according to Bloomberg Businessweek.

Meanwhile, the prosecution has been highlighting Rajaratnam’s attempts to cover up his alleged insider trading.

The prosecution played tapes of calls between Rajaratnam and Galleon executives in which Rajaratnam seems to be instructing colleagues to create an “email trail” to hide the fact that Galleon was purchasing a stock due to an illegal tip, according to a March 17 article in The New York Times. The prosecution also played tapes in which Rajaratnam instructs a different colleague to buy more stock than she wants and to sell the additional shares. The prosecution argued that this technique makes it more difficult for the government to detect insider trading.

These tapes are among approximately 2,400 conversations obtained through government wiretapping that were allowed into evidence by Holwell on Nov. 24, 2010.

It is the first time such evidence is being used in an insider trading case, according to Bloomberg Businessweek. Note: This article was updated to clarify that Rajaratnam is an MBA graduate.

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