* U.S. prosecutors expect more charges in the case
* Investigators say they have more cooperating witnesses
* U.S. asks judge to deny Rajaratnam bail requests
* Trial of civil case set for next August
(Recasts to add U.S. prosecutors cite cooperators, request
denial of Rajaratnam bail, defense letter on wire taps)
By Grant McCool
NEW YORK, Nov 4 Investigators expect more
people to be charged in the Galleon hedge fund insider trading
case, and they said they have cooperating witnesses to
strengthen their case against the fund's billionaire founder
In statements at a court hearing and in briefs on Wednesday
in parallel federal civil and criminal cases, the government
signaled publicly for the first time since Rajaratnam and five
others were arrested on Oct. 16 that its net was widening.
"There is a real possibility that we will be adding
additional parties," U.S. Securities and Exchange Commission
lawyer Valerie Ann Szczepanik said in a Manhattan court hearing
in the civil case. "We can't comment on the timing."
Federal prosecutors have described the case as the
biggest-ever hedge fund insider-trading scandal, involving
executives of some well-known U.S. companies, including Intel
Corp's (INTC.O) venture capital arm, International Business
Machines (IBM.N) and McKinsey & Co management consultants.
The Sri Lankan-born Rajaratnam, 52, and the five other
defendants are free on bail. [ID:nN29365117]
In court papers asking a judge to jail Rajaratnam because
he may be a flight risk, prosecutors mentioned Roomy Khan, a
convicted felon and former Intel employee cited as a
cooperating witness in media reports as well as in an Oct. 29
letter to the court by Rajaratnam's lawyers. [ID:nN0437779]
"This attempt to undermine the government's evidence falls
flat," the prosecutor's brief in Manhattan federal court said.
"As the complaint itself makes clear, the defendant's
assertion that the government's case hinges on a single witness
is false," it said. "This case involves wiretap evidence of the
defendant making incriminating statements that would be strong
even absent the testimony of any cooperating witness. In
addition, there is more than one cooperating witness."
The document does not identify the cooperating witnesses,
and mentions Khan only in response to last week's letter from
Rajaratnam's lawyers, seeking to reduce his bail to $25 million
from $100 million and to ease his travel restrictions.
A hearing on bail issues is set for Thursday. Rajaratnam's
lawyer John Dowd declined to comment on Wednesday.
Prosecutors have said the case is the first time
court-approved telephone wiretaps were used in a Wall Street
The SEC complaint said the unlawful trading involved inside
information concerning 10 different companies, including Google
Inc (GOOG.O), Hilton Hotels Corp HLNQ.PK and Intel Corp.
Rajaratnam's lawyers on Wednesday asked a judge to order
the government to provide the court orders and applications
authorizing intercepted conversations on which its allegations
"The government was required to produce this material by
statute but impermissibly failed to do so prior to utilizing
the evidence to its advantage," the letter to U.S. Magistrate
Judge Theodore Katz said.
In the civil case, which usually is superseded by the
criminal case, U.S. District Judge Jed Rakoff on Wednesday set
Aug. 2, 2010 for the start of a jury trial.
He said "No" to 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.
The cases are USA v Raj Rajaratnam et al, U.S. District
Court, Southern District of New York, No.09-mj-2306; and SEC v
Galleon Management et al in the same court, No. 09-08811.
(Reporting by Grant McCool, Editing by Gerald E. McCormick and