Galleon Founder Rajaratnam Wins Right to Keep Wiretap Papers Confidential

Galleon Group LLC founder Raj Rajaratnam, who faces criminal insider-trading charges, won a bid to keep confidential wiretap applications that prosecutors say may be disclosed to the public.

Rajaratnam in March opposed the government’s request for a court procedure that would address “the public’s right to access wiretap applications” that investigators probing him confidentially submitted to a judge.

Rajaratnam argued “no such right exists” and that the applications should remain secret until a judge decides whether the wiretaps may be used at his trial. His attorney, John Dowd, said Rajaratnam’s right to try to exclude the wiretaps from his trial “would be irreversibly compromised if the government were permitted to publicize the same evidence in public filings” before a judge ruled.

“Though the First Amendment grants the public and the media a right of access” to such wiretap documents, “that right is far from absolute,” U.S. District Judge Richard Holwell in Manhattan said in a ruling made public yesterday.

“Shielding such material from the public eye is often critical to protect defendants’ fair trial and privacy interests, especially when the material has yet to be tested in court,” the judge said.

Wiretap Applications

Prosecutors had asked Holwell for a procedure that lawyers in the case could follow when submitting wiretap applications.

“The government’s proposed procedure does not address the special concerns that untested wiretap material raises,” Holwell said.

The government’s insider-trading case is based on testimony from cooperating witnesses and wiretaps of Rajaratnam and others. Rajaratnam has pleaded not guilty.

In a related ruling, Holwell denied a request by Rajaratnam’s lawyers for access to unedited documents related to Roomy Khan, a government witness in the case against Rajaratnam.

The U.S. asked for permission to redact portions of the documents that related “to ongoing covert investigations involving two individuals occasionally mentioned in the Khan documents,” Holwell said in a ruling issued yesterday.

Rajaratnam’s lawyers had argued they wanted the unedited documents because they were pertinent to his defense and would “aid him in impeaching the credibility of Khan.”

Holwell said that while the unedited material “demonstrates that Khan provided inconsistent information to the government,” he denied Rajaratnam’s request.

In a letter to Holwell, Rajaratnam’s lawyers said they would file papers with the court by May 7 seeking to challenge the legality of the government’s “first-ever use of wiretaps” in connection with an insider-trading probe.

Dowd said Rajaratnam’s lawyers would ask Holwell to suppress the government’s wiretap evidence on the grounds that insider trading is “an offense for which Congress has not authorized the use of wire surveillance.”

The case is U.S. v. Rajaratnam, 09-CR-01184, U.S. District Court, Southern District of New York (Manhattan).

To contact the reporter on this story: Patricia Hurtado in New York at pathurtado@bloomberg.net.

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