Rengan Rajaratnam Loses Bid to Block Wiretaps, Dismiss Charges

Rengan Rajaratnam, brother of imprisoned hedge-fund founder Raj Rajaratnam, lost a bid to dismiss insider-trading charges or exclude wiretap evidence federal prosecutors want to use at his June trial, potentially giving the government more leverage to obtain a plea deal.

Wiretaps were central to the convictions of Raj Rajaratnam, co-founder of Galleon Group LLC, and his co-conspirator, former Goldman Sachs Group Inc. director Rajat Gupta. Raj Rajaratnam is serving an 11-year sentence for insider trading, while Gupta must report to prison to start his two-year sentence on June 17, the same day Rengan Rajaratnam is scheduled to go to trial.

U.S. District Judge Naomi Reice Buchwald denied a request by Rengan Rajaratnam, 43, to dismiss his indictment, while casting doubt on two of the seven counts against him, in an opinion made public yesterday in Manhattan federal court. She also rejected Rajaratnam’s request that she suppress wiretap evidence against him, citing rulings by a federal appeals court in rejecting similar arguments by his brother.

Rengan Rajaratnam is charged with six counts of securities fraud and one count of conspiracy. The Rajaratnam and Gupta cases were among the first securities fraud prosecutions in which investigators used widespread tapping of targets’ telephone calls, a tool often used in prosecuting organized crime and drug trafficking.

Daniel Gitner, a lawyer for Rengan Rajaratnam, didn’t immediately respond to a phone message seeking comment on Buchwald’s ruling.

Clearwire Stock

In a hearing last month, Buchwald criticized two of the counts against Rengan Rajaratnam charging him with aiding and abetting his brother in the purchase of Clearwire Corp. stock based on illegal tips in 2008.

“The government fails to allege a single fact that conceivably supports its aiding and abetting theory,” Buchwald said in her opinion. She said she’ll wait for prosecutors to tell her whether they plan to withdraw the two counts before deciding on Rajaratnam’s request that she dismiss them.

The case is U.S. v. Rajaratnam, 13-cr-00211, U.S. District Court, Southern District of New York (Manhattan).

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