More targets in Galleon insider case

By Grant McCool

NEW YORK (Reuters) - Investigators expect more people to be charged in the Galleon hedge fund insider trading case, and they said they have cooperating witnesses to strengthen their case against the fund's billionaire founder, Raj Rajaratnam.

In statements at a court hearing and in briefs on Wednesday in parallel federal civil and criminal cases, the government signaled publicly for the first time since Rajaratnam and five others were arrested on October 16 that its net was widening.

"There is a real possibility that we will be adding additional parties," U.S. Securities and Exchange Commission lawyer Valerie Ann Szczepanik said in a Manhattan court hearing in the civil case. "We can't comment on the timing."

Federal prosecutors have described the case as the biggest-ever hedge fund insider-trading scandal, involving executives of some well-known U.S. companies, including Intel Corp's (INTC.O: Quote, Profile, Research) venture capital arm, International Business Machines (IBM.N: Quote, Profile, Research) and McKinsey & Co management consultants.

The Sri Lankan-born Rajaratnam, 52, and the five other defendants are free on bail.

In court papers asking a judge to jail Rajaratnam because he may be a flight risk, prosecutors mentioned Roomy Khan, a convicted felon and former Intel employee cited as a cooperating witness in media reports as well as in an October 29 letter to the court by Rajaratnam's lawyers.

"This attempt to undermine the government's evidence falls flat," the prosecutor's brief in Manhattan federal court said.

"As the complaint itself makes clear, the defendant's assertion that the government's case hinges on a single witness is false," it said. "This case involves wiretap evidence of the defendant making incriminating statements that would be strong even absent the testimony of any cooperating witness. In addition, there is more than one cooperating witness."