Rajaratnam painted as two men in fund trial

NEW YORK Wed Mar 9, 2011 5:40pm EST

1 of 6. Raj Rajaratnam is seen during his trial in New York in this artist sketch.

Credit: Reuters/Jane Rosenberg/Handout

Related Video


Related Topics

NEW YORK (Reuters) - A corrupt man or a legitimate stock researcher?

Prosecution and defense lawyers painted starkly different portraits of hedge fund manager Raj Rajaratnam at the start of the biggest Wall Street insider trading case in a generation.

Rajaratnam, a Sri Lankan-born, one-time billionaire, sat impassively and wrote occasional notes on a legal pad during the two hours of opening statements in his high-stakes trial in Manhattan federal court.

"Greed and corruption. This is a case about that man right there, Raj Rajaratnam, using stolen business information to make tens of millions of dollars," Jonathan Streeter, an assistant U.S. attorney, told the jury, pointing at Rajaratnam.

But defense lawyer John Dowd told jurors that "the government has it wrong" and the Galleon Group founder engaged in legal stock research and analysis that made him successful.

The government accuses Rajaratnam, the central figure in a vast insider trading probe, of reaping $45 million in illegal profit between 2003 and March 2009. The U.S. Justice Department has made insider trading probes into the secretive $1.9 trillion hedge fund industry a priority, and the Rajaratnam prosecution is its signature case.

The defense team faces hundreds of secretly recorded phone calls in evidence and several former friends or employees who will testify for the prosecution. Rajaratnam's lawyers contend that the government has significantly broadened its definition of insider trading.

"There is a real world context in which law abiding professionals discuss stocks and trades," Dowd told the jury of 12 and six alternates. "In the real world people are discussing stocks. It is legal and it is good for all of us.

"These things are going on blocks from this courthouse," Dowd said, referring to nearby Wall Street. "It was his duty to seek out information to make smart investment decisions."

In the wood-paneled courtroom, both lawyers stood at a podium when it was their turn to address the jury. Dozens of cardboard document boxes and files were piled in one corner that are being used in the case.

Streeter said Rajaratnam obtained an illegal advantage over ordinary investors. "He exploited a corrupt network of people to obtain information" about company secrets such as earnings and mergers, the prosecutor said.

He said Rajaratnam "gets tomorrow's business news today."

Rajaratnam attended the trial with no one except his lawyers, unlike many defendants who have family or friends with them.


Not since the mid-1980s has a Wall Street insider trading case grabbed such wide public attention. Then, speculator Ivan Boesky, Drexel Burnham Lambert and its junk bond chief, Michael Milken, were prosecution targets.

Rajaratnam could go to prison for 20 years if convicted of the most serious charge of securities fraud.

Since arresting Rajaratnam in October 2009 and announcing criminal charges against 26 former traders, executives and lawyers, authorities have pressed on with what they call the biggest ever hedge fund insider trading probe.

Nineteen people have pleaded guilty in the case. It stands apart from past insider trading investigations because of the government's wide-scale use of phone taps. Jurors will hear up to 173 audio recordings during the trial.

The jurors, including a nurse, a graphic artist and a city transportation department employee, were chosen from a pool of about 150 people. They include five men and seven women.

During jury selection, they were questioned about their attitudes toward Wall Street, wealthy financiers and their hobbies. There were light moments such as when one woman, asked what she liked to do in her free time, said "jury duty." She was picked for the panel.

The case is USA v Raj Rajaratnam, U.S. District Court for the Southern District of New York, No. 09-01184.

(Additional reporting by Basil Katz, editing by Andrew Marshall, Dave Zimmerman, Gary Hill and Bernard Orr)

We welcome comments that advance the story through relevant opinion, anecdotes, links and data. If you see a comment that you believe is irrelevant or inappropriate, you can flag it to our editors by using the report abuse links. Views expressed in the comments do not represent those of Reuters. For more information on our comment policy, see http://blogs.reuters.com/fulldisclosure/2010/09/27/toward-a-more-thoughtful-conversation-on-stories/
Comments (3)
5tudentT wrote:
Gripping? There’s plenty more going on that holds far more interest for me.

The end result, unless Rajaratnam is put to work making restitution, will be a miscarriage of justice. Putting him in a cell does nothing for him or anyone else.

Mar 09, 2011 1:35pm EST  --  Report as abuse
ALAN_PW7 wrote:
What kind of news is this??
Greed drives all the world’s economies.
Mr prosecutor….your government is among the offenders in wanting more and more income to augment an ever-growing government/union collaboration

Mar 09, 2011 4:43pm EST  --  Report as abuse
kandamuruga wrote:
Innocent until proven guilty – that should be the maxim of all discussions. The prosecutor wants to fast track this so as to enhance his reputation as a saviour of small investors – he is clueless. In his Elliot Spitzer like zeal, he will eat humble pie. They don’t understand how the investment banks and funds seek out advantage before the little people. What is the difference between Bloomberg, reuters, and Analysts – none – they all try their level best to get the news first – and that translates to profits. Wake up and smell the coffee.

Mar 09, 2011 9:23pm EST  --  Report as abuse
This discussion is now closed. We welcome comments on our articles for a limited period after their publication.