May 5 (Bloomberg) -- Jurors in the insider-trading trial of Raj Rajaratnam reheard recordings of wiretapped conversations played for them last week after restarting deliberations following the replacement of one member of the panel.
With an alternate seated on the panel after Juror 2 was dismissed for medical reasons, U.S. District Judge Richard Holwell in Manhattan yesterday told the eight women and four men to begin weighing the charges anew. The panel later asked to hear 12 wiretaps of Rajaratnam’s phone conversations, nine of which had been played before for the jurors, who began the first round of deliberations April 25.
The jury left yesterday afternoon and will resume deliberations today.
One of the three new recordings captured a conversation in which former McKinsey & Co. partner Anil Kumar told Galleon Group LLC co-founder Rajaratnam, 53, about “massive layoffs on Monday,” which prosecutors said was a tip about job cuts at EBay Inc. in October 2008.
“I love that they’re listening to these calls,” Assistant U.S. Attorney Reed Brodsky told the judge after the jurors left the courtroom. “Some of these calls are fantastic for the government.”
Holwell again refused a U.S. request to give transcripts of the recordings to the jury. The prosecution said jurors may not know precisely which recordings to ask for because they lack a master list and transcripts.
Rajaratnam was arrested in October 2009 in the largest crackdown on hedge-fund insider trading in U.S. history. Prosecutors, relying in part on wiretaps of the defendant’s phone calls, said he gained $63.8 million from tips leaked by corporate insiders and hedge-fund traders about 15 stocks.
Rajaratnam, who said he based the trades on research, was tried on five counts of conspiracy and nine counts of securities fraud. He faces as long as 20 years in prison if convicted of the most serious charges. The trial began March 8.
The defendant, who wasn’t in court earlier this week because of emergency foot surgery, was also absent yesterday. There were no deliberations the previous day as unspecified medical considerations prevented the former Juror 2 from coming to court.
The woman, a 70-year-old retired bookkeeper, lives on Manhattan’s Upper West Side. The man named to replace her is a 39-year-old employee of the Westchester County, New York, parks department. Three jurors now on the panel were originally chosen as alternates. Three alternates remain.
“Beginning anew is the same duty it always was. The law requires you to base your verdict solely upon the evidence,” Holwell told the jury. “The verdict must represent the verdict of each juror, including the new juror that’s been seated.”
Jurors must decide for themselves how to start over, said Stephen Miller, a former federal prosecutor in New York and Philadelphia now in private practice at Cozen O’Connor.
“There’s no one standing over them giving them an A-plus or a C-plus on their deliberations,” said Miller. “It’s totally self-governed.”
The change, which will probably delay a verdict, doesn’t necessarily favor one side or the other, Miller said.
Holwell yesterday also said he sealed “several transcripts of proceedings,” without providing details of their subject. In a one-page order, Holwell cited “the secrecy and integrity of jury deliberations and privacy of deliberating jurors.”
The judge has held a number of nonpublic hearings, during the trial and deliberations, and ordered the transcripts sealed.
The deliberations follow six weeks of trial testimony. The Galleon case was the first one focused exclusively on insider trading in which prosecutors wiretapped their targets’ telephone conversations.
During the trial, jurors listened to more than 40 recordings of Rajaratnam, in some of which he can be heard gathering information from his sources. Last week, the jury asked to rehear about 15.
In one Sept. 11, 2008, call secretly recorded by the FBI and reheard by the jury yesterday, Rajaratnam discussed the turmoil in the markets and the credit crisis with Kumar.
“It’s very stressful, you know every day you come in and it’s, I feel like I’m fighting Muhammad Ali,” Rajaratnam said during the call. “I know he’s stronger and he’s faster, but you’re in the ring with him. And he doesn’t just, you know, you try to survive and hope that he gets tired.”
During the call, the former McKinsey & Co. partner tells Rajaratnam he’s been speaking to people “in the loop” of an upcoming deal in which Abu Dhabi’s Mubadala Development Co. was investing in a 2008 spinoff of Sunnyvale, California-based Advanced Micro Devices Inc.
Kumar, who had been advising AMD on the transaction, said the deal, scheduled for September, was being delayed.
“It’s gonna October first week, but it’s all on track,” Kumar said.
The jury also heard a tape it hadn’t heard since it began deliberations, in which Kumar and Rajaratnam discuss the defendant’s brother Rengan and conversations he had with David Palecek, a McKinsey employee who was in charge of semiconductors.
“Let’s ask him to be a little discreet about these types of things,” Kumar tells Rajaratnam about his brother during the Oct. 3, 2008, call. “This completely unnerved David, you know, I don’t think, other guys can handle this.”
Palecek, who wasn’t accused of wrongdoing, died last year of a staph infection, according to his lawyer, Catherine Redlich.
Holwell yesterday scheduled the sentencing of Danielle Chiesi, a former New Castle Funds LLC analyst accused of passing inside information to Rajaratnam, for May 25.
The case is U.S. v. Rajaratnam, 1:09-cr-01184, U.S. District Court, Southern District of New York (Manhattan).
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