* Lawyers for Galleon founder want to suppress recordings
* Civil trial postponed to February 2011 from August
* Rajaratnam and Chiesi have asked for separate trials
(Adds civil fraud trial postponed to Feb. 14 next year)
By Grant McCool
NEW YORK, March 24 Galleon hedge fund founder
Raj Rajaratnam, accused of insider trading along with several
associates, won a suspension of a court order to hand over
wiretap evidence to U.S. market regulators, pending appeal.
The U.S. Court of Appeals for the 2nd Circuit in New York
ordered a stay in favor of Rajaratnam and co-defendant Danielle
Chiesi on Wednesday after a lower court order in February
compelled them to disclose wiretap evidence gathered in the
A trial on civil fraud charges brought by the U.S.
Securities and Exchange Commission was set to start Aug. 2
before U.S. District Judge Jed Rakoff, but in an order
Wednesday, he postponed it until Feb. 14, 2011.
Lawyers for Sri Lanka-born U.S. citizen Rajaratnam and
former New Castle Funds LLC trader Chiesi are seeking to
suppress 18,000 recordings in what U.S. prosecutors describe as
the biggest hedge fund insider trading case in the United
Rajaratnam's lawyers argued before a three-judge appeals
court panel on Tuesday that the use of the recordings in the
SEC case ignored "the plain text" of the wiretap statute and
Investigators said Rajaratnam, 52, and Chiesi, 44, made as
much as $49 million of illicit gains after using tips from
insiders to trade.
The criminal trial is scheduled to begin on Oct. 25, but
both Rajaratnam and Chiesi are seeking separate trials. When
there are parallel civil and criminal charges, typically the
criminal trial takes precedence.
At least 21 executives, traders and lawyers have been hit
with criminal or civil charges, or both. Ten have pleaded
guilty, and eight, including some former Rajaratnam associates
and Galleon employees, are cooperating with the government.
The appeals court set a June 8 deadline for all briefs
before oral arguments are scheduled.
In postponing the SEC trial of Rajaratnam and other
defendants including former executives, traders, lawyers and
trading firms, Rakoff noted in a written order that since the
"resolution of the wiretap issue cannot realistically be
expected before July 2010, an August 2 trial is no longer
A spokesman for the SEC declined to comment on the appeals
Rajaratnam's lawyer, John Dowd, said in a statement he was
pleased with the panel's ruling.
One of Chiesi's lawyers, Don Buchwald, said, "It is
important that all parties be given the chance to litigate
before any of these interceptions are used or misused."
The appellate case is: SEC v. Galleon Management et al,
U.S. Court of Appeals for the Second Circuit, No. 10-0462. The
lower court case is: SEC v Galleon Management et al, U.S.
District Court, Southern District of New York, No. 09-08811.
(Reporting by Grant McCool; Editing by Leslie Gevirtz and