Rajaratnam denies insider charges, blasts wiretaps

By Jonathan Stempel and Grant McCool

NEW YORK (Reuters) - Galleon Group hedge fund founder Raj Rajaratnam attacked a U.S. regulator's lawsuit on Tuesday, denying insider trading charges and saying government wiretaps violated his constitutional rights.

The Sri Lankan-born billionaire is the most prominent of 20 people who face criminal or civil charges in the largest U.S. hedge fund insider trading case on record and Wall Street's first insider trading probe involving court-approved wiretaps.

"Electronic surveillance is permitted only when necessary for the investigation of specified crimes and only when alternative investigative procedures have been tried or appear unlikely to succeed," Rajaratnam's lawyers, including prominent Washington attorney John Dowd, said in a filing with Manhattan federal court.

The filing came in response to a civil lawsuit originally brought by the U.S. Securities and Exchange Commission on Oct. 16, the day Rajaratnam was arrested and accused by prosecutors of generating millions of dollars of illegal profits.

Rajaratnam, 52 and a U.S. citizen, is free on $100 million bond. Galleon managed $3.7 billion when he was arrested, but is now winding down.

Lawyers for Rajaratnam denied SEC allegations their client conducted insider trading in Advanced Micro Devices Inc, Akamai Technologies Inc, Clearwire Corp, Google Inc, Hilton Hotels Corp, Intel Corp, PeopleSupport Inc and Polycom Inc.

They also said Rajaratnam did not know enough about alleged insider trading in other stocks, such as International Business Machines Corp and Sun Microsystems Inc.

The lawyers also said that, when seeking permission to intercept telephone calls, investigators ignored a 1968 federal law in failing to tell the court that the SEC, "under the guise of an investigation of another unrelated hedge fund," had interviewed Rajaratnam and others, and that Galleon had given the agency tens of thousands of pages of documents.