* Prosecutors add charges in criminal case
* Civil trial scheduled for Aug. 2
* Defendants have until Feb. 15 to turn over wiretaps
(Adds Rajaratnam asks judge to stay wiretap order pending
appeal, paragraph 2)
By Grant McCool
NEW YORK, Feb 9 Additional criminal charges
were filed on Tuesday against Galleon hedge fund founder Raj
Rajaratnam as prosecutors alleged he and his co-defendant
reaped $49 million from illegal insider trading, up from an
earlier claim of $40 million.
In the parallel civil case against Rajaratnam and
co-defendant Danielle Chiesi, a judge ordered the two
defendants to turn over wiretaps to the U.S. Securities and
Exchange Commission. In a letter to Manhattan federal court
Judge Jed Rakoff on Tuesday night, Rajaratnam's lawyers asked
him to stay the order pending an appeal.
Thousands of wiretaps were made in the criminal probe
between 2003 and 2009 involving Wall Street and Silicon Valley
firms that was announced last October, but lawyers for the
defendants and the SEC have been tussling over their use in the
parallel civil fraud case.
Rajaratnam, 52, and Chiesi, 44, a former employee of New
Castle Funds LLC, were arrested last October and indicted in
December on charges of securities fraud and conspiracy in what
prosecutors have described as the biggest hedge fund insider
trading case in the United States.
The new indictment adds two more counts of securities fraud
against Rajaratnam. In a letter to the court on Tuesday, his
lawyers said they would ask the judge presiding the criminal
case to order a separate trial from Chiesi.
The indictment alleges that Rajaratnam made a total of $45
million and Chiesi $4 million in a wide-ranging scheme that
also led to charges against a score of other traders, lawyers
or fund managers. Rajaratnam and Chiesi face possible prison
sentences of up to 20 years if convicted.
They pleaded not guilty to the original indictment. The
next hearing is scheduled for Feb. 11.
"Mr. Rajaratnam is innocent and looks forward to his day in
court when a jury of his fellow citizens will examine and
evaluate all of the evidence," his lawyer, John Dowd, said in a
Chiesi's lawyer Alan Kaufman said the superseding
indictment "has nothing new with regard to the allegations
against my client."
Separately on Tuesday, Rakoff ruled that Rajaratnam and
Chiesi, who are fighting to keep the wiretap evidence out of
both criminal and civil cases, must provide the SEC with
recordings they received from criminal prosecutors by Feb. 15.
"The notion that only one party to a litigation should have
access to some of the most important non-privileged evidence
bearing directly on the case runs counter to basic principles
of civil discovery in an adversary system," Rakoff's written
While the SEC and criminal prosecutors often coordinate
with each other, there are limits under the law on the
information they can share in parallel civil and criminal
cases, which is why the defense was ordered to provide the
material and not the prosecutors.
"We are obviously disappointed and respectfully disagree
with the ruling," Chiesi's lawyer Kaufman said.
In the wider insider trading probe, 21 people have been
criminally or civilly charged. Nine have pleaded guilty. Eight
of those are cooperating with the government's investigation,
including two longtime friends of Rajaratnam, former McKinsey &
Co executive Anil Kumar and Rajiv Goel, a former director of
the treasury group at Intel Capital, the investment arm of Inel
"Rajaratnam, Chiesi and others repeatedly traded on
material, nonpublic information pertaining to upcoming earnings
forecasts, mergers, acquisitions, or other business
combinations," the office of the Manhattan U.S. Attorney said
in a statement on Tuesday.
It said the superseding indictment charges trading based on
inside information in Intel Corp (INTC.O), International
Business Machines Corp (IBM.N), Akamai Technologies Inc
(AKAM.O), Polycom Inc PLCM.O, Hilton Hotels Corp HLNQ.PK,
Google Inc (GOOG.O), Sun Microsystems Inc SUNW.TI, Clearwire
Corp CLWR.O, Advanced Micro Devices AMD.N, ATI Technologies
Inc and eBay Inc (EBAY.O) Inc.
The cases are USA v Raj Rajaratnam and Danielle Chiesi,
U.S. District Court for the Southern District of New York, No.
09-01184 and SEC v Galleon Management LP et al 09-cv-08811.
(Reporting by Grant McCool and Jonathan Stempel; editing by