More defendants may be added in Galleon case: SEC

Galleon hedge fund partner Raj Rajaratnam is escorted by FBI agents after being taken into custody in New York October 16, 2009.

NEW YORK (Reuters) - More defendants may be added to the insider-trading case involving the hedge fund firm Galleon Group, a lawyer for the U.S. Securities and Exchange Commission said on Wednesday.

The lawyer, Valerie Ann Szczepanik, made the comments during the first hearing in Manhattan federal court since the SEC filed civil charges on October 16 against Galleon founder Raj Rajaratnam and five others, some of them executives of well-known U.S. companies.

Criminal charges have also been filed against the six.

"There is a real possibility that we will be adding additional parties," Szczepanik said. "We can't comment on the timing."

Federal prosecutors have described the case as the biggest-ever hedge fund insider-trading scandal. Rajaratnam, 52, a Sri Lankan-born billionaire, and the five other defendants are free on bail.

The SEC's complaint said the unlawful trading involved inside information concerning 10 different companies, including Google Inc, Hilton Hotels Corp and Intel Corp

Among those accused of criminal and civil charges are executives of Intel's venture capital arm, International Business Machines and McKinsey & Co management consultants.

U.S. District Judge Jed Rakoff turned down a joint proposal by the SEC and some of the defense lawyers to put the civil case on hold for 90 days to obtain and review electronic surveillance material obtained in the criminal case.

Prosecutors said the case marked the first time court-approved telephone wire taps were used in a Wall Street insider-trading investigation.

Usually, when there are parallel criminal and civil charges against defendants, the criminal case takes precedence and the civil case is put on hold. In this civil case, however, Rakoff set trial for August 2, 2010.

He simply said "No" to the proposal to put the civil case on hold.

Rakoff drew attention earlier this year when he ordered a trial after the SEC and Bank of America Corp reached a settlement over bonuses paid at Merrill Lynch & Co.

Rajaratnam's lawyer, John Dowd, told reporters after the hearing that he had been prepared to go to trial on the original date set by the judge -- April 2, 2010.

Dowd declined further comment.

The case is SEC v Galleon Management et al, U.S. District Court for the Southern District of New York, No. 09-08811.

(Reporting by Grant McCool and Caroline Humer, Editing by Gerald E. McCormick and John Wallace)