New York (HedgeCo.net) – Hedge fund founder Raj Rajartatnan has spent the last four weeks listening tho the prosecution’s allegations and the case has moved on to his rebuttal. The defense called i’s first witness today in what is being calle d the largest insider trading case in history.
WNYC – The defense has called its first witness, Gregg Jarrell, the SEC’s chief economist under the Reagan Administration. He is expected to testify that the information Rajaratnam allegedly used to make trades wasn’t significant, and if the government can’t show the information was important to other investors, it could lose its case.
Other likely witnesses include John Pernell, president and chief investment officer of Polaris Investment Partners; Robert Hotz, one of Rajaratnam’s lawyers; and Rick Schutte and Stephen Granoff, former Galleon employees.
Bloomberg lists the 14 counts that Rajaratnam must refute:
Count 1 (Conspiracy) Rajaratnam conspired with Galleon colleagues to use inside tips to trade in stocks including ATI Technologies Inc., Vishay Intertechnology Inc. and Integrated Circuit Systems Inc.
Defense: Terence Lynam, a lawyer for Rajaratnam, argued there’s insufficient evidence that Rajaratnam knew Smith’s source was leaking inside data or that his client knowingly joined in a conspiracy, and that the evidence of tips from the others is speculative.
Count 2 (Conspiracy) Rajaratnam conspired with Roomy Khan, a former Intel Corp. (INTC) executive and stock trader who has pleaded guilty, to use inside information Khan got from other sources about Google Inc., Hilton Hotels Corp., and Polycom Inc.
Defense: Lynam said that because prosecutors didn’t call Khan or her alleged sources as witnesses, and didn’t tell jurors the content of the alleged tips, the government is asking jurors to speculate that inside information was passed along a chain to Rajaratnam.
Count 3 (Conspiracy) Rajaratnam conspired with Rajiv Goel, a former friend who leaked information about Intel and Clearwire Corp.
Defense: Rajaratnam’s lawyers claim there’s no evidence Goel reached an illegal agreement with Rajaratnam or that the hedge fund manager knew the information from Goel was confidential.
Count 4 (Conspiracy) Rajaratnam conspired with Anil Kumar, a former friend and now ex-partner at McKinsey & Co., to illegally trade on tips from McKinsey clients including EBay Inc. andAdvanced Micro Devices Inc. (AMD)
Defense: The defense said the information that Kumar allegedly leaked was already public, citing press reports.
Count 5 (Conspiracy) Rajaratnam conspired with Danielle Chiesi, a trader at New Castle Funds, about Sunnyvale, California-based semiconductor products-maker AMD and Akamai Technologies Inc. (AKAM)
Defense: Rajaratnam’s team argued there’s no evidence supporting what Chiesi was told by her sources and that prosecutors can’t establish a conspiracy. Prosecutors didn’t call Chiesi, who pleaded guilty, as a witness.
Count 6, 7 (Securities Fraud) Rajaratnam committed insider trading in Kirkland, Washington-based Clearwire, a wireless broadband provider, on March 24 and March 25, 2008, after he got a tip from Goel that Intel would enter a joint-venture with the company.
Defence: The defense said there’s no proof that Rajaratnam gave a benefit to Goel in return for the information, that news of a pending deal was already public and that the alleged leak wasn’t an important part of Rajaratnam’s trading decision.
Counts 8, 9, 10 (Securities Fraud) Rajaratnam allegedly engaged in insider trading in Akamai on July 25, July 29 and July 30, 2008, after he got a tip from Chiesi about the Cambridge, Massachusetts-based company’s plan to reduce its earnings guidance.
Defense: The defense said there were published analyst reports showing that Akamai, a provider of services to speed Internet content delivery, would reduce its earnings.
Counts 11, 12 (Securities Fraud) Rajaratnam is accused of insider trading in Los Angeles- based PeopleSupport on July 28 and Oct. 7, 2008 after getting a tip from Krish Panu, a member of the company’s board, that it would be acquired.
Defense: The defense claims there’s no evidence that Rajaratnam got the tip before trading in PeopleSupport on July 28, and the Oct. 7 tip came after a company press release. There’s no evidence Panu breached a legal duty to PeopleSupport or obtained a benefit by disclosing the information, the defense said.
Count 13 (Securities Fraud)Rajaratnam is accused of insider trading in ATI Technologies from March to July 2006, after getting tips from Smith and Kumar that ATI would be acquired.
Defense: The defense said prosecutors failed to show that Smith, who allegedly got his information from Ahmed, was in a conspiracy with the Morgan Stanley (MS) banker, or that Rajaratnam paid Kumar for his information. Galleon research was the basis of the trade, they said.
Count 14 (Securities Fraud) Rajaratnam is accused of insider trading in Intel in April 2007 after getting tipped by Goel about profit margins.
Defense: The defense claims that, because Goel got the information from Intel’s investor relations department, Rajaratnam had no reason to think it was secret.
Reuters – Through cross-examination and hearings, the defense has previewed its “mosaic theory” of stock trading in Manhattan federal court — the Galleon Group founder’s trades were based on a collection of research, analysis and public information, not corporate secrets whispered to him by high-placed insiders.
“If the information is already out there, including in newspaper reports, it can’t be found to be non-public,” Lynam has argued before the judge.
The case is U.S. v. Rajaratnam, 1:09-cr-01184, U.S. District Court for the Southern District of New York (Manhattan).
Editing by Alex Akesson
For HedgeCo.net
alex@hedgeco.net
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