NEW YORK (Reuters) - Indicted Galleon hedge fund founder Raj Rajaratnam and his lawyers should “listen to the tapes” of government wiretaps in a wide-ranging insider trading probe, a lawyer for government cooperator Roomy Khan said on Wednesday.
Khan, a former Galleon hedge fund and Intel Corp employee who pleaded guilty at a closed court proceeding on October 19, has been the focus of Rajaratnam lawyer John Dowd’s arguments in denying charges in what prosecutors describe as the biggest hedge fund insider case ever.
Dowd has argued in court papers that much of the government’s case relied on Khan, who was convicted of wire fraud in 2001. He said the government “found no evidence that Mr Rajaratnam traded on insider information allegedly provided by Ms Khan” from her cooperation in an earlier probe.
Investigators used wire taps to gather evidence of alleged insider trading in big name companies such as Hilton Hotels and Google Inc, among others.
“I suggest Mr Dowd should listen to the tapes, then make the evaluation,” Khan’s lawyer Stanislao German told reporters after his client appeared in Manhattan federal court on Wednesday. “She wants to be 100 percent truthful and she takes responsibility for what she has done.”
U.S. District Court Judge Richard Berman formally accepted the guilty plea and set a tentative sentencing date of May 17 for Khan, who is free on bail. She wore a tightly wrapped black coat during her brief appearance, answering “Yes, Sir” or “I understand” to the judge’s questions.
Khan is one of six traders or lawyers who have pleaded guilty and are cooperating.
Rajaratnam, 52, is the most prominent defendant among 21 accused in an insider trading case involving employees of some of America’s best-known companies, including IBM Corp, McKinsey & Co and Intel Capital, an arm of Intel Corp.
Sri Lankan-born Rajaratnam and Danielle Chiesi, a former employee of New Castle Funds LLC, are the only two defendants indicted so far. The indictments returned on Tuesday formalize charges of securities fraud and conspiracy to commit securities fraud against the pair, who were arrested on October 16.
It was unclear why four others arrested and charged on the same day have not been indicted.
They are Rajiv Goel, a former director at Intel Capital; Anil Kumar, former director of management consulting firm McKinsey & Company Inc; Mark Kurland, former executive at New Castle hedge fund; and Robert Moffat, former senior vice president and executive in IBM’s systems and technology group.
Their lawyers did not return telephone calls.
Lawyers for Rajaratnam and Chiesi said their clients would plead not guilty and fight the charges. They are free on bail with a court date scheduled for Monday.
In the overall case, inside trading allegedly took place in shares of Google, Sun Microsystems, Advanced Micro Devices, Polycom, Hilton, Intel, Clearwire, Akamai, Athero Securities and IBM, among others.
The case is USA v Roomy Khan, U.S. District Court for the Southern District of New York, No. 09-0991.
Reporting by Grant McCool. Editing by Robert MacMillan