Rajaratnam neck-deep in trouble, phone taps replayed

NEW YORK: The noose on hedge fund manager Raj Rajaratnam is tightening. In what could spell more trouble for him, the jury at the insider trading trial went in for rehearing a dozen FBI phone taps centred on one transaction involving the Galleon Group founder.

The federal jury, at the beginning of its third week of deliberations, listened intently in the New York courtroom to 12 of the secretly-recorded conversations. All but one of them were between Rajaratnam and former Intel Corp executive Rajiv Goel.

 Rajaratnam neck-deep in trouble, phone taps replayed

Noose tightens on Galleon Group hedge fund cofounder Raj Rajaratnam.Spencer Platt/Getty Images

Goel pleaded guilty to criminal charges and testified against his former friend Rajaratnam during the trial, which began on March 8. The men were accused of conspiring to get advance word on a wireless network venture announced in May 2008 between Clearwire Corp and Sprint Nextel Corp with an investment by Intel.

Rajaratnam's lawyers argued that the information was already public, that it had been discussed in analysts' reports and Goel had no inside information to provide. During the cross-examination and closing statements, defence lawyers said Goel lied in order to try and get a lighter prison term when he is sentenced.

Sri Lankan-born Rajaratnam is accused of making an illicit $63.8 million between 2003 and March 2009 in trades involving more than a dozen stocks. He is the central figure in what US prosecutors have called the biggest-ever probe of insider trading at hedge funds. Some of the phone taps on the Clearwire transaction were replayed for the benefit of an alternate juror who replaced a sick juror last week during deliberations.

The Clearwire transaction is in the third, sixth and seventh counts of the 14-count indictment. The charges involve mostly tech stocks, but also include one that Rajaratnam was tipped by Rajat Gupta, a former director of Goldman Sachs Group, Wall Street's most influential bank.

Twenty-one out of 26 defendants have pleaded guilty in the broad Galleon case. Three are scheduled to go on trial in the same courthouse on May 16. One is at large.

A hallmark of the investigation was the use of FBI phone taps to secretly monitor phone conversations. Rajaratnam, 53, faces up to 25 years in prison if he is convicted on conspiracy and securities fraud charges.

Reporters who caught a glimpse inside the jury room when the jurors filed out into the courtroom to listen to the tapes, saw a large wooden table strewn with papers, binders, notebooks and water bottles. The jurors, who until Monday had deliberated for a total of eight days over two weeks, listened intently to the calls while reading the transcripts on video screens in front of their seats in the jury box.

Rajaratnam sat with his lawyers, looking straight ahead. He missed three days of court last week because of a bacterial infection in his right foot. The case is USA v Raj Rajaratnam et al, US District Court for the Southern District of New York, No. 09-01184.

Reuters

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Updated Date: Dec 20, 2014 03:44:54 IST