UPDATE 2-U.S. appeals court upholds conviction of Galleon's Rajaratnam

Mon Jun 24, 2013 10:12pm IST

Related Topics

Stocks

   

By Jonathan Stempel and Nate Raymond

June 24 (Reuters) - A federal appeals court on Monday upheld the insider trading conviction of Galleon Group hedge fund founder Raj Rajaratnam, rejecting his argument that wiretap evidence was used improperly to convict him.

The unanimous decision by a three-judge panel of the 2nd U.S. Circuit Court of Appeals in New York was a victory for federal prosecutors, who have used wiretaps to win convictions or guilty pleas for 73 defendants in a wide-ranging probe into insider trading that was unveiled in October 2009.

"It does give the government more discretion and makes it easier to secure wiretap applications," said Kevin O'Brien, a former federal prosecutor who is now a partner at Harris, O'Brien, St. Laurent & Houghteling.

Patricia Millett, a lawyer for Rajaratnam, declined to comment. A spokeswoman for U.S. Attorney Preet Bharara in Manhattan declined to comment.

Rajaratnam, 56, is serving an 11-year prison term. A federal jury convicted him in May 2011 of nine counts of securities fraud and five counts of conspiracy.

The government said Rajaratnam, whose firm once managed $7 billion, made as much as $63.8 million in illicit profit from 2003 to March 2009 trading on stocks including eBay Inc ; Goldman Sachs Group Inc ; Google Inc ; Intel Corp ; and ATI Technologies Inc, which was bought by Advanced Micro Devices Inc.

Prosecutors said the Goldman trades included trades during the 2008 financial crisis, just after Rajaratnam got a tip from Goldman director Rajat Gupta of an infusion in the bank from Warren Buffett's Berkshire Hathaway Inc.

It was the highest-profile conviction of a hedge fund executive to date in the crackdown on insider trading. Gupta is the highest-ranking corporate executive convicted, and is appealing his June 2012 conviction and two-year prison sentence.

WIRETAPS

As part of the probe, investigators relied heavily on wiretaps, a tool that until then was more often associated with mafia prosecutions.

In March 2008, prosecutors sought to wiretap Rajaratnam's cell phone in a bid to identify his network of inside sources and gather evidence for criminal cases.

The wiretaps were also at the center the case against Gupta, the former head of management consultancy McKinsey & Co who prosecutors say gave Rajaratnam inside information about Goldman Sachs Group Inc, where Gupta was a board member.

Rajaratnam's lawyers had argued the recordings should have been suppressed because the initial wiretap application contained misstatements or omissions.

The 2nd Circuit rejected those arguments. U.S. Circuit Judge Jose Cabranes, writing for the court, said details Rajaratnam said "all of the alleged misstatements and omissions were not 'material.'"

Cabranes also rejected Rajaratnam's argument that former U.S. District Judge Richard Holwell's jury instructions on the use of inside information were erroneous.

O'Brien, who is not involved in the case, said Monday's decision "gives the government comfort when making applications of this kind that they don't have to turn square corners as long as any mistakes or omissions are not deemed material end day."

The case is U.S. v. Rajaratnam, 2nd U.S. Circuit Court of Appeals, No. 11-4416.

FILED UNDER:
Comments (0)
This discussion is now closed. We welcome comments on our articles for a limited period after their publication.

  • Most Popular
  • Most Shared

Pricing Controls

REUTERS SHOWCASE

India-China Relations

India-China Relations

India says to defend China border after standoff ahead of Xi visit.  Full Article 

Importing Iron Ore

Importing Iron Ore

As mining curbs bite, India offers market to glut-hit iron ore.  Full Article 

Drug Approval

Drug Approval

Epirus, Ranbaxy win India approval for arthritis drug copy.  Full Article 

Rajan Speaks

Rajan Speaks

RBI chief Rajan says limiting reliance on foreign debt.  Full Article 

Debt & Equity Deal

Debt & Equity Deal

KKR to lend $175 million to GMR Infrastructure - source.  Full Article 

Preparing for IPO

Preparing for IPO

Alibaba boosts IPO as demand strengthens.  Full Article 

India-Vietnam Ties

India-Vietnam Ties

India tightens Vietnam defence, oil ties ahead of China Xi's visit.  Full Article 

Reuters India Mobile

Reuters India Mobile

Get the latest news on the go. Visit Reuters India on your mobile device.  Full Coverage