Rajaratnam lawyers ready to "rock" for March trial

NEW YORK (Reuters) - The defense team for accused Galleon hedge fund founder Raj Rajaratnam is ready to "rock" for his criminal trial next month on insider trading charges.

In court on Wednesday for the final pretrial hearing, the smartly-dressed Rajaratnam briefly stood for the formality of responding to a second superseding indictment returned by a grand jury on January 20.

"Yes, Your Honor," and "Not Guilty, Your Honor," Rajaratnam said in response to questions from U.S. District Judge Richard Holwell, who will preside over the six- to eight-week long trial starting on March 8.

Onetime billionaire Rajaratnam is charged with conspiracy to commit securities fraud and securities fraud, which together carry a prison sentence of up to 25 years.

He was arrested and charged in October 2009, the central figure in what U.S. prosecutors describe as the biggest probe of insider trading at hedge funds on record.

Out of about two dozen people charged in two purportedly linked insider trading networks, 19 have pleaded guilty instead of going to trial. The case is also marked by investigators' unprecedented use in a white-collar probe of telephone tape recordings to gather evidence.

"We'll rock on March 8," Rajaratnam's main lawyer, Washington defense attorney John Dowd, said after the hearing in U.S. District Court in New York. "It was helpful to tee things up for the judge on the tapes."

The court heard that the government could introduce as many as 173 tape recordings to the jury. Last November, Rajaratnam lost a bid to suppress the government's wiretap evidence.

Prosecutors declined to comment after the hearing.

In a linked case involving traders and some former Galleon employees, a judge ordered a hearing for March 9 to assess whether there was "unnecessary intrusion" by FBI agents on monitored personal calls between defendant Craig Drimal and his wife. Drimal, who worked in the Galleon office but was not an employee, has pleaded not guilty, as have four others in that case.

Judge Holwell, who last week postponed the start of Rajaratnam's trial to March 8 from February 28, ruled that he did not see evidence of "intentional sandbagging" after defense lawyers challenged the government's addition of stocks to the case in December and January.

The allegations of insider trading against Rajaratnam center on a total of 35 stocks, mostly of technology companies. Galleon had $7 billion under management at its peak. A defense attorney, Terence Lynam, told the judge that the 35 stocks represented less than one per cent of the total of thousands of trades conducted by Rajaratnam.

Among the companies on which Rajaratnam is accused of receiving or passing on information between 2003 and March 2009 are Advanced Micro Device Inc, Google Inc, Goldman Sachs Group Inc, Atheros Communications Inc and Hilton Hotels Corp.

The government must prove that Rajaratnam knew that information he received and on which he traded was provided by insiders who had a fiduciary duty to keep information confidential about company earnings reports or mergers and acquisitions.

Federal prosecutors accuse Rajaratnam of making as much as $45 million in trades from confidential information about publicly traded companies.

A prosecutor, Reed Brodsky, and defense lawyer Lynam, sparred in court over expert witnesses that the defense could call to testify at trial.

"Every day that passes without the government knowing, hurts the government," Assistant U.S. Attorney Brodsky said.

Lynam said he would file a written response on expert witnesses and audio recordings by Friday.

The judge ruled that the jury could hear certain evidence about profits to the Galleon funds from which Rajaratnam would also have benefited.

The cases are USA v Raj Rajaratnam, U.S. District Court for the Southern District of New York, No. 09-01184 and USA v Goffer No. 10-00056.

(Reporting by Grant McCool; Editing by Gerald E. McCormick)