Rajaratnam criminal insider trading trial begins
March 8, 2011 11:33 pm
March 8 (Bloomberg) - The criminal trial of Galleon Group LLC co-founder Raj Rajaratnam began in federal court in Manhattan today as more than 100 potential jurors were assembled to be questioned about their views of Wall Street, hedge fund managers and the recession.
Rajaratnam, 53, whose trial began today in federal court in Manhattan, is the central figure in the largest crackdown on hedge-fund insider trading in U.S. history. The Sri Lankan-born money manager is accused of making $45 million from confidential information leaked by corporate insiders and hedge fund traders. He may spend as long as 20 years in prison if convicted of fraud.
Rajaratnam denies wrongdoing and has argued that investment advisers routinely speak to company insiders as they do research.
“As we all know, a lot of people on Wall Street make a lot of money,” U.S. District Judge Richard Holwell wrote in a 15- page juror questionnaire he disclosed yesterday. “And you will hear evidence about multimillion-dollar transactions. Does anyone think that evidence about wealthy individuals and multimillion-dollar transactions will make it difficult for you to decide the case fairly?”
Defense Table
Rajaratnam came to court with seven lawyers. There is a row of two tables reserved for the defendant and his lawyers and Rajaratnam is sitting at a seat at the far left of the second table, as far away from the jury box as possible. In the first row are his lead defense lawyers, John Dowd and Terence Lynam of Akin Gump Strauss Hauer & Feld LLP. The government team consists of six people, at least three of whom are Assistant U.S. Attorneys.
Holwell began questioning the first 40 jurors and elicited a murmur from the group when he said the trial would last 2 ½ months. Eight of the potential jurors said they had knowledge of the case.
About 11:30 a.m., Holwell read out a list of potential witnesses and subjects that might be called during the trial. The list included Rajaratnam’s two brothers, as well as Goldman Sachs Group Inc. (GS) Chief Executive Officer Lloyd C. Blankfein, former McKinsey & Co. managing partner and Goldman board member Rajat Gupta, and former Intel Corp. employee Rajiv Goel. Goel has said he tipped Rajaratnam about Intel’s earnings.
Hedge Fund Views
The juror questionnaire also asks about views on the financial industry and the recession. Holwell wrote: “Over the past few years there have been a lot of news articles about the role of hedge funds and investment banks, and the Wall Street executives that run these companies, in the recession that the country is going through.”
“Of course, many of us have been hurt by the recession and we all have opinions as to whether someone is to blame for it,” the questionnaire says. “Does the fact that the case involves the financial industry, Wall Street executives, hedge funds, mutual funds and the like, make it difficult for anyone to render a fair verdict?”
The judge will ask potential jurors about their views on insider trading and regulatory and criminal prosecutions of such cases. “Does anyone have any feelings, for or against the insider trading laws that would make it difficult to render a fair and impartial verdict?” he wrote.
Heritage Questions
The questionnaire probes potential jurors’ feelings about “Americans with an Indian or South Asian heritage.” Holwell wrote: “Is there anything about this fact that would affect your ability to be impartial?”
At a March 4 hearing, Holwell said that of the 300 residents summoned to jury duty in the case from eight New York state counties, half were excused for hardship reasons in a trial that could take as long as 10 weeks. Holwell said yesterday that he will interview the remaining potential jurors individually using the questionnaire so that prosecutors and defense attorneys can select a panel of 12 jurors and six alternates.
Holwell initially rejected use of such a questionnaire. Last week, lawyers for Rajaratnam argued to the judge that prospective jurors should be questioned about bias in light of a civil action filed March 1 by the U.S. Securities and Exchange Commission against Gupta, who was accused of leaking stock tips to Rajaratnam.
The SEC alleged that Gupta provided inside information to Rajaratnam, including news of Berkshire Hathaway Inc.’s $5 billion investment in Goldman Sachs, Goldman Sachs’s earnings as well as earnings at Procter & Gamble Co. Prosecutors said at the March 4 hearing that Gupta was “a conspirator” with Rajaratnam in the insider trading scheme.
In a Feb. 28 letter to the SEC, Dowd argued that the filing of a civil action so close to the start of Rajaratnam’s criminal trial would cause “chaos.”
The case is U.S. v. Rajaratnam, 1:09-cr-01184, U.S. District Court, Southern District of New York Manhattan).