NEW YORK, June 18 (Reuters) - Just because the one-time billionaire hedge fund manager Raj Rajaratnam engaged in insider trading doesn't mean his younger brother did as well, a lawyer for Rengan Rajaratnam told jurors on Wednesday.
In opening statements during Rengan Rajaratnam's trial in New York federal court, lawyer Daniel Gitner portrayed his client as the youngest of five children who lived in the shadow of his oldest brother, Galleon Group LLC's founder.
U.S. prosecutors say Rengan Rajaratnam conspired with his brother to trade on inside information about technology companies, Clearwire Corp and Advanced Micro Devices Inc , in 2008.
While evidence would show Raj Rajaratnam was seeking out secret information to trade on, said Gitner, Rengan Rajaratnam was focused on legitimate research and was never told any illegal tips.
"Rengan did not do what Raj did, Rengan did not know what Raj knew, and Rengan is flat out not guilty," he said.
But Christopher Frey, an assistant U.S. attorney, told jurors Rengan Rajaratnam used confidential information his older brother had obtained from a corrupt network of professionals.
"He did so to get an illegal edge over ordinary investors in the stock market who played by the rules," Frey said.
The statements came at the start of the insider trading trial of Rengan Rajaratnam, 43, who faces three counts of conspiracy and securities fraud.
Much of the evidence will comprise wiretap conversations by Raj Raratnam, alleged tippers and his brother, the government has said.
Wiretap recordings prominently featured in the 2011 trial of Raj Rajaratnam, 57, who is serving an 11-year prison term. The U.S. Supreme Court on Monday declined to overturn the conviction.
Prosecutors plan to call two key alleged tippers, Rajiv Goel, a former Intel Corp executive, and Anil Kumar, a onetime McKinsey & Company partner, Frey told jurors Wednesday.
Frey said Goel told Raj Rajaratnam in March 2008 that Intel was planning to invest $1 billion in Clearwire, a tip that helped Galleon make hundreds of thousands of dollars and Rengan to personally earn $100,000.
Later, in August 2008, Kumar told Raj Rajaratnam about a planned multi-billion dollar deal involving AMD, Frey said. Rengan Rajaratnam, who was told about the deal by Raj, earned $40,000 trading in AMD, Frey said.
Goel and Kumar previously pleaded guilty, testified at Raj Rajaratnam's trial and were sentenced in 2012 to two years probation. They have been subpoenaed to testify at Rengan Rajaratnam's trial, Frey said.
Still, Gitner said Rengan traded differently than his brother, relying on research. His relationship with Raj Rajaratnam was "complicated," and Rengan was twice effectively demoted in 2008 after trading losses made him "furious," he said.
Gitner said there was no evidence Raj Rajaratnam told Rengan about his sources, let alone any benefits they received from providing inside information.
"These brothers weren't joined at the hip," he said.
The case is U.S. v. Rajaratnam, U.S. District Court, Southern District of New York, No. 13-00211. (Editing by Noeleen Walder and Bernadette Baum)