NEW YORK (Reuters) - The biggest U.S. insider trading case in decades was expected to head into opening statements on Wednesday in a court showdown between prosecutors and lawyers for Galleon hedge fund founder Raj Rajaratnam.
The selection of a 12-member jury and six alternates for the two-month-long trial made quick progress on Tuesday, and the judge expected to be ready for opening statements the next day.
“We will have openings tomorrow for sure either before or after lunch,” Manhattan federal court Judge Richard Holwell said after the jury pool had been sent home for the day. “It will take a couple more hours to empanel a jury.”
The jurors were told by Holwell that Lloyd Blankfein and David Viniar -- the Goldman Sachs Group Inc chief executive and chief financial officer -- were on a list of people who might testify or be mentioned during the trial.
The criminal trial of onetime billionaire Rajaratnam, 53, whose Galleon Group hedge funds managed $7 billion at their peak, will feature wiretap evidence and the testimony of as many as six former friends and associates, some of whom once had top positions in corporate America.
Rajaratnam has vowed to clear his name at trial.
Goldman’s shares are among 35 stocks cited in the charges. Rajaratnam is accused of obtaining inside information about the bank from a friend who sat on the company’s board. Goldman is not accused of wrongdoing.
Chief defense lawyer John Dowd argues that prosecutors have broadened the definition of insider trading. A money manager’s liberty should not be at risk because he trades on a stock while knowing something about the company, Dowd argues.
The burden of proof is on prosecutors to convince the jury that their evidence shows Rajaratnam knew he was trading on confidential information provided by someone who had a fiduciary duty not to disclose it.
The 150 potential jurors sat for 5-1/2 hours in a large courtroom listening to questions such as whether they had read news articles about the case, knew anyone involved in it, purchased stock in certain companies or ever been questioned by law enforcement officers.
At least 16 jurors were excused on Tuesday for reasons ranging from anger over the financial crisis through views on law enforcement to personal health problems.
The list of potential witnesses or people who could be mentioned includes the names of 102 people and 50 companies. Many of the companies’ shares are technology stocks that prosecutors accuse Rajaratnam of either illegally gathering information about or trading in between 2003 and March 2009.
The government says Rajaratnam made $45 million in illegal profit. He could face a 20-year prison sentence if convicted on the most serious charge of securities fraud.
Since arresting Rajaratnam in October 2009 and announcing criminal charges against 26 former traders, executives and lawyers, the U.S. government has pressed ahead with what it calls the biggest probe of insider trading in the $1.9 trillion hedge fund industry.
Nineteen people have pleaded guilty in the Galleon case. It stands apart from past insider trading investigations because of the government’s wide-scale use of phone taps.
Rajaratnam was mobbed by photographers and TV crews when he walked into the courthouse on Tuesday morning and as he left at the end of the day. Dressed in a brown coat and a suit, he said nothing on both occasions.
In the courtroom, Rajaratnam sat at the third table back from his team of seven lawyers. He stared straight ahead during jury selection, displaying no reaction.
The case is USA v Raj Rajaratnam et al, U.S. District Court for the Southern District of New York, No. 09-01184.
Reporting by Grant McCool, Additional reporting by Basil Katz; editing by Dave Zimmerman, Gary Hill