Rajaratnam Jury Candidates Ask ‘Lloyd Who?’ on Trial’s First Day

Galleon Co-Founder Raj Rajaratnam
Raj Rajaratnam, the Galleon Group co-founder accused of insider trading, arrives at federal court for the start of his trial in New York. Photographer: Peter Foley/Bloomberg

In the days before the trial of Galleon Group LLC co-founder Raj Rajaratnam, much of the pre-trial legal wrangling focused on whether Rajaratnam would be harmed by publicity about the case.

John Dowd, his lawyer, complained that jurors were likely to be biased against Rajaratnam after the U.S. Securities and Exchange Commission filed a civil action against a potential witness, Rajat Gupta, a former Goldman Sachs Group Inc. director accused by the SEC of tipping Rajaratnam.

Dowd may not have needed to worry.

Of the first 40 potential jurors questioned by U.S. District Judge Richard Holwell in Manhattan yesterday, only eight had heard of Rajaratnam. The judge, after privately questioning those eight, concluded that only one of them should be excused from the case.

Holwell also read the names of dozens of people who will testify or be mentioned during the trial, and asked the candidates whether they had heard of any of them. The names mentioned included Goldman Sachs Chief Executive Officer Lloyd Blankfein, who may be a witness for the prosecution. Not a single juror had heard of Blankfein, who testified before Congress last year about his firm’s role in the 2008 financial crisis.

And the judge mispronounced Blankfein’s name. Instead of pronouncing the second syllable as “fine,” Holwell rhymed it with “bean.”

Early Victory

The biggest insider-trading trial in a generation began with a legal victory for Rajaratnam.

As Holwell took the bench at 9:50 a.m., he told the lawyers that he agreed with the defense on an important legal principle. As the potential jurors waited to enter the courtroom, Holwell said he would instruct the jury selected to hear the case that they may convict Rajaratnam only if he knew his alleged tipper had breached a legal duty owed to the company from which the news emanated.

Holwell said his ruling was only “preliminary,” and prosecutors briefly tried to talk him out of a decision that may make it harder for the government to prove its case.

“There’s a more nuanced instruction,” Assistant U.S. Attorney Reed Brodsky told Holwell.

The lawyers said they would argue the issue in far greater depth before the judge sends the case to the jury.

Nothing on Martha

The Rajaratnam trial may be the most far-reaching financial trial on Wall Street in years. Still, he’s got nothing on Martha Stewart when it comes to media star power.

Outside the courthouse yesterday were three satellite trucks. As jury selection began, just 18 or so journalists sat in the back row of the courtroom. Courthouse officials had set aside a separate room for journalists squeezed out of the courtroom. That space was mostly empty of reporters.

Compare that to the 2004 trial of Stewart, who was convicted of obstructing a government investigation into her stock trades. In that trial, dozens of journalists filled three rows of courtroom benches on an almost daily basis. That throng included celebrity reporters such as Dominick Dunne, who was writing for Vanity Fair.

Stewart was greeted outside the courthouse on Day 1 of her trial by about 100 photographers, and her supporters held placards high.

Seven years and three days after Stewart’s conviction, Rajaratnam encountered just a few cameramen as he entered the courthouse and proceeded through security.

Dark Suit, Hunched

Among the least noticeable characters in the courtroom was the defendant himself.

Rajaratnam, wearing a dark double-breasted blazer, walked into the courtroom with seven lawyers. There was no sign of family or friends.

While other white-collar defendants including Stewart and former WorldCom Inc. CEO Bernard Ebbers sat at the defense table next to their lawyers during trial, Rajaratnam took a seat yesterday behind Dowd at the second of two mahogany tables.

As jury selection got under way, he was quiet, hunched forward in his seat. Unlike his lawyers, he didn’t crane his neck to look at the 100 potential jurors summoned to the courtroom.

Holwell told lawyers in the case to be ready to give their opening statements today after they finish selecting 12 jurors and six alternates.

The case is U.S. v. Rajaratnam, 1:09-cr-01184, U.S. District Court, Southern District of New York (Manhattan).

Before it's here, it's on the Bloomberg Terminal. LEARN MORE