Raj Rajaratnam, the former Galleon Group LLC hedge fund manager convicted of directing the biggest insider-trading ring in a generation, asked a federal appeals court to let him remain free while he challenges the government’s use of wiretaps in his trial.
Rajaratnam, 54, scheduled to begin an 11-year sentence in a Massachusetts prison next week, claims improper wiretapping of his phone conversations will lead to reversal of his May conviction and that he should remain free in the meantime. A panel of the U.S. Court of Appeals in New York declined to rule immediately after a 20-minute hearing today.
Patricia Millett, a lawyer for Rajaratnam, told the court his appeal presents a “substantial question of law” and said he’s unlikely to flee to his native Sri Lanka before the appeal is decided.
“His passport was surrendered ages ago. All his family are here,” Millett told a three-judge panel of the court. “He has nothing to go to in Sri Lanka.”
U.S. District Judge Richard Holwell, who presided over the case and sentenced Rajaratnam last month, rejected his request for bail pending the appeal. Rajaratnam claims a March 7, 2008, wiretap application by FBI special agent B.J. Kang contained “glaring omissions” that would likely lead the appeals court to reverse his conviction, justifying his release on bail.
Millett argued the omissions violated Rajaratnam’s constitutional rights and the legal requirement that the government show wiretapping is necessary before getting a warrant.
“There is no substantial question of law likely to result in a new trial,” said Assistant U.S. Attorney Jonathan Streeter, who argued that the court should let Rajaratnam begin his prison term.
Streeter told the panel that no defendants have ever been returned to the U.S. under its 22-year-old extradition treaty with Sri Lanka. And the home detention and electronic monitoring ordered by Holwell is no guarantee that Rajaratnam won’t run, he said.
“I do know that people successfully flee all the time,” he said.
Prosecutors said Rajaratnam made more than $72 million by using illegal tips to trade in stocks of companies including Goldman Sachs Group Inc. (GS), Intel Corp., Google Inc., ATI Technologies Inc. and Clearwire Corp.
Last November, Holwell ruled the government had complied with federal wiretapping laws in its investigation. Prosecutors said it was the first insider-trading case in which the government made extensive use of wiretaps to prove its case.
Prosecutors, who introduced 45 wiretap recordings into evidence during the trial, opposed Rajaratnam’s request for release while his appeal is in progress.
Prosecutors said the fund manager still has “significant net worth” even after U.S. District Judge Jed Rakoff, who is presiding over a lawsuit against Rajaratnam by the U.S. Securities and Exchange Commission, directed Rajaratnam to pay a record $92.8 million penalty while Holwell ordered Rajaratnam to pay a $10 million fine and forfeit $53.8 million.
The case is U.S. v. Rajaratnam, 11-4416, U.S. Court of Appeals for the Second Circuit (Manhattan). The lower-court case is U.S. v. Rajaratnam, 09-01184, U.S. District Court, Southern District of New York (Manhattan).
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