The judge overseeing Rengan Rajaratnam’s insider-trading trial denied a defense request to dismiss the last remaining charge of conspiracy, a day after she narrowed the case by rejecting two fraud counts.
U.S. District Judge Naomi Reice Buchwald in Manhattan said today at a hearing outside the jury’s presence that the trial of the younger brother of imprisoned hedge fund manager Raj Rajaratnam would go forward. Yesterday, at the end of the government’s direct case, she dismissed two securities fraud counts related to 2008 trades in Clearwire Corp.
Combined, the two rulings are still a victory for Rengan Rajaratnam, who denies wrongdoing. The top penalty for securities fraud is 20 years in prison, while the maximum sentence for conspiracy is five years.
“I’m going to have to deny the request,” Buchwald said, telling defense attorney Daniel Gitner that he can tell jurors in summations that there’s not enough evidence of conspiracy.
Rengan Rajaratnam, who worked his way up through Steven A. Cohen’s SAC Capital Advisors LP to become a portfolio manager at Galleon Group LLC, the hedge fund co-founded by his brother, stands accused of conspiring with his brother and two others -- Anil Kumar, then a director at McKinsey & Co., and Danielle Chiesi, a securities analyst -- to trade illegally in stocks including Advanced Micro Devices Inc.
At today’s hearing, Buchwald told prosecutors to marshal their evidence against the defendant and not others who’ve been convicted of insider trading, such as Raj Rajaratnam, Chiesi and Kumar.
“Your burden is to prove that this defendant entered into an agreement with his brother -- and I think the only person can be his brother -- and entered into a conspiracy to commit insider trading,” Buchwald said. “You need to focus on what your real burden is and not just dirt about everybody else.”
Defense lawyer Dan Gitner began presenting his case today by calling Luke Sito, a former Galleon analyst who worked for Rengan Rajaratnam. Gitner told the judge he plans to call two character witnesses tomorrow.
Buchwald dismissed the fraud charges saying prosecutors failed to present enough evidence that Rengan Rajaratnam used inside tips to trade in Clearwire, on which he earned $800,000. The evidence showed that Raj Rajaratnam kept Rengan in the dark about his sources and there was no proof Rengan Rajaratnam knew whether his brother’s tippers were receiving some benefit in exchange for their leaks, she said.
The government can’t appeal Buchwald’s dismissal of the fraud counts. Before the trial, prosecutors trimmed their case by dropping other fraud counts when Buchwald said they were “internally inconsistent” with the conspiracy charge.
Raj Rajaratnam is serving a 11-year prison term for insider trading.
The case is U.S. v. Rajaratnam, 13-cr-00211, U.S. District Court, Southern District of New York (Manhattan).