Rajaratnam Jury Listens Again to Wiretaps, Deliberations Set for Third Day
Rajaratnam Jury Deliberates
Jin Lee/Bloomberg
Raj Rajaratnam, the Galleon Group co-founder accused of insider trading, exits federal court in New York on Wednesday, March 23, 2011.
Raj Rajaratnam, the Galleon Group co-founder accused of insider trading, exits federal court in New York on Wednesday, March 23, 2011. Photographer: Jin Lee/Bloomberg
April 27 (Bloomberg) -- Daniel Ruzumna, partner at Patterson Belknap Webb & Tyler LLP, discusses the insider-trading trial of Galleon Group LLC co-founder Raj Rajaratnam. Jurors in the Rajaratnam trial, after listening again yesterday to wiretaps of the defendant’s phone calls, are set to resume their deliberations today. Ruzumna speaks with Erik Schatzker on Bloomberg Television's "InsideTrack." (Source: Bloomberg)
Jurors in the Raj Rajaratnam insider-trading trial, after listening again to wiretaps of the defendant’s phone calls, are set to resume their deliberations today in the insider-trading trial.
The panel asked yesterday to rehear nine recordings, including one of Rajaratnam talking with former McKinsey & Co. partner Anil Kumar. Kumar, who pleaded guilty in the case, told the jury how he tipped Rajaratnam to news about clients. In the call, recorded March 24, 2008, Kumar discussed a possible transaction between Fujitsu Ltd. and Lenovo Group Ltd.
“They are very, very far in discussion,” Kumar could be heard saying as jurors sat in silence in the jury box in Manhattan federal court.
Rajaratnam, 53, was arrested in October 2009 in the largest crackdown on hedge-fund insider trading in U.S. history. Prosecutors say he gained $63.8 million from tips leaked by corporate insiders and hedge-fund traders about stocks including Goldman Sachs Group Inc. (GS), Intel Corp. (INTC) and Clearwire Corp. Rajaratnam, who says he based the trades on research, faces as long as 20 years’ prison on some counts.
In another call replayed yesterday, Rajaratnam and his brother Rengan are heard discussing whether another McKinsey employee might become a source of inside tips. The jurors listened to Raj Rajaratnam, co-founder of Galleon Group LLC, chatting with his friend Rajiv Goel, who was an executive at Intel before he pleaded guilty and testified for prosecutors.
Jurors also reheard a recording of Rajaratnam talking to Krish Panu, a director of PeopleSupport Inc., about a transaction involving the company; a conversation between Kumar and Rajaratnam about a possible role for Kumar in a firm co- founded by Rajaratnam; and Rajaratnam talking with a Galleon trader about the stock market’s performance on Sept. 12, 2008.
The jurors, who began deliberating yesterday, didn’t explain why they wanted to hear the calls. More than 40 such recordings were played at trial.
‘Elements’ of Crimes
Raj Rajaratnam isn’t technically on trial for insider trading. He’s accused of securities fraud and conspiracy. Insider trading is the fraudulent scheme that violates both the securities-fraud and conspiracy laws.
As U.S. District Judge Richard Holwell explained to the jury on April 25, the panel must return a verdict on 14 separate counts: nine for securities fraud and five for conspiracy. Insider trading is a “specific scheme” rendered illegal by the securities fraud and conspiracy statutes, he said.
To find that Rajaratnam violated securities laws, jurors must conclude that there’s evidence beyond a reasonable doubt of several elements, the judge said. Jurors must find that he “employed a device, scheme or artifice to defraud;” that he did so “willfully, knowingly and with the intent to defraud;” and that he used the “means or instruments” of interstate transportation or communication to do so.
Holwell broke it down further.
To find that Rajaratnam engaged in a scheme -- that is, insider trading -- jurors must conclude that his source of information had “a relationship of trust and confidence” with a particular company, that the insider breached that relationship by leaking tips, that Rajaratnam knew of the breach of duty, and that Rajaratnam used “material, non-public information” to buy and sell stock, Holwell said.
Conspiracy is equally complex. “The essence of the crime of conspiracy is an agreement or understanding to violate another law,” Holwell said.
Conspiracy also has several elements, Holwell said: that there was “an agreement or understanding among at least two people” to violate U.S. laws, that Rajaratnam knowingly became a member of that conspiracy, and that any one member of the conspiracy knowingly committed at least one act in furtherance of the scheme.
Jury Foreman
Leading the jury’s discussions is a 56-year-old man who has worked for two years as a graphic artist for Apple Inc. (AAPL) A native of Manhattan’s Lower East Side, the juror selected as foreman has lived in the Bronx for about a decade. He’s one of three men on the 12-person jury.
During jury selection seven weeks ago, he told the judge that he is married to a school teacher, reads Macworld and Sports Illustrated, and enjoys watching ESPN and playing video games.
“The basic guy stuff,” he said.
He’s also a fan of the New York Knicks, who were swept this week by the Boston Celtics in National Basketball Association post-season play.
It isn’t clear whether he thinks the Rajaratnam trial was as one-sided.
‘Last Name Unknown’
Don’t let it be said that lawyers lack a sense of humor.
As reporters chatted on benches yesterday waiting for word from the jury, Sabrina Shroff, a public defender, poked her head into the courtroom, scanned the crowd and said in a loud voice, “Excuse me, but is there anyone here for ‘Last Name Unknown, First Name Unknown’?”
Shroff had come to Holwell’s courtroom to represent a client in a sentencing in an unrelated case. The defendant, Jose Rivera, refused to give a name at the time of his arrest and first appeared as a defendant in U.S. v. Last Name Unknown, First Name Unknown.
In an interview later, Shroff said her question was meant to contrast for the assembled reporters the fame of Rajaratnam with the anonymity of her client.
What was “Last Name Unknown, First Name Unknown” being sentenced for? Aggravated identity theft.
Rivera got 24 months in prison.
The insider-trading case is U.S. v. Rajaratnam, 1:09-cr- 01184, U.S. District Court, Southern District of New York (Manhattan).
To contact the reporters on this story: David Glovin in Manhattan federal court at glovin@bloomberg.net; Patricia Hurtado in Manhattan federal court at phurtado@bloomberg.net; Bob Van Voris in Manhattan federal court at rvanvoris@bloomberg.net
To contact the editor responsible for this story: Michael Hytha at mhytha@bloomberg.net
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