December 5, 2023

DealBook: Galleon Chief’s Lawyer Presses His Argument for Acquittal

9:13 p.m. | Updated

Raj Rajaratnam’s lawyer on Thursday concluded his defense with the argument that Mr. Rajaratnam took advantage only of publicly available information

All of the inside information that Mr. Rajaratnam, the co-founder of the Galleon Group hedge fund, is accused of trading on, said his lawyer, John Dowd, was already public in the form of news articles and research reports speculating about deals and events.

“He took advantage of public information available to the whole world, and that’s why you must acquit,” Mr. Dowd told jurors.

The defense’s assertion stands in stark contrast with the insider trading case that federal prosecutors have endeavored to build over the last two months, using trading records, cooperating witnesses and most important, secretly recorded phone calls.

Mr. Dowd finished his closing statement on Thursday, and the case is expected to go to the jury in Federal District Court on Monday.

Raj Rajaratnam, the Galleon Group's co-founder, leaving federal court on Thursday as his insider trading trial heads toward a conclusion.Louis Lanzano/Bloomberg News Raj Rajaratnam, the Galleon Group’s co-founder, leaving federal court on Thursday as his insider trading trial heads toward a conclusion.

Mr. Rajaratnam, who is accused of pocketing more than $50 million in illicit profits, faces up to 25 years in prison if convicted.

During the government rebuttal on Thursday, jurors were asked to imagine themselves as the average investor, with the flurry of information that surfaces every day on the Web and in their e-mail boxes.

“Now imagine that you have all that plus you have an insider at a bunch of companies,” Jonathan Streeter, the prosecutor, told them. “Which do you think has a huge advantage?

That dispute between what constitutes insider information versus rumor and speculation remained the focus in the final days of the trial. Both sides are trying to sway jurors about the importance of knowing details of things like mergers and earnings before companies make their announcements.

Mr. Dowd spent time on Thursday disparaging the government’s cooperating witnesses, who pleaded guilty and testified about the details of the scheme.

Rajiv Goel, a former Intel executive who took the stand to tell jurors of tips he secreted to Mr. Rajaratnam, was “belligerent, hostile, uncooperative and downright bizarre,” Mr. Dowd said.

At times, Mr. Dowd seemed to take their cooperation personally, calling the arrangement one had with the government a “sweetheart deal” to avoid prison time for lying about Mr. Rajaratnam.

The Galleon networkAzam Ahmed and Guilbert Gates/The New York Times Click on the above graphic to get a visual overview of the Galleon information network.

And just as the government used recordings and transcripts of conversations to bolster their argument to jurors, so, too, did Mr. Dowd. Though he played just one recorded call, Mr. Dowd relied heavily on transcripts from the trial to highlight what he considered inconsistencies in testimony from government witnesses.

“Thank God for cross-examination,” said Mr. Dowd, who said that several of the cooperators had cracked when subjected to questioning.

Mr. Dowd spoke in a gravelly monotone with few gestures, his glasses perched atop his nose. Unlike Reed Brodsky, the prosecutor, who shouted and roamed before the jurors with an intense energy during his summation on Wednesday, Mr. Dowd had an avuncular manner and remained behind his lectern, reading notes from a binder.

Mr. Dowd tried to cast doubt on the government’s interpretation of a secretly recorded conversation in September 2008 during which Mr. Rajaratnam told his trader that he had purchased Goldman stock because “I got a call saying something good is going to happen to Goldman.” The government said that Mr. Rajaratnam was referring to Warren E. Buffett’s $5 billion investment in Goldman — news that a member of the bank’s board was accused of leaking to Mr. Rajaratnam.

“You can’t take the words ‘something good’ and turn them into Warren Buffett,” said Mr. Dowd, who argued that Mr. Rajaratnam had bought Goldman shares because of the prospect of a government bailout of the banks.

Mr. Dowd also criticized the prosecution for not calling some of Mr. Rajaratnam’s supposed accomplices to the witness stand. The government has accused Mr. Rajaratnam of engaging in an insider trading conspiracy with Roomy Khan, a former Intel employee and a trader who has pleaded guilty to passing tips to Mr. Rajaratnam from corporate insiders. But the government did not ask Ms. Khan to testify, instead relying on trading and phone records to prove its case.

“This is an insider trading conspiracy, but you haven’t heard from any of the insiders or any of the co-conspirators,” Mr. Dowd said.

He repeatedly reminded jurors that there needed to be only a reasonable doubt for them to acquit his client — even in instances when bits of the supposed tip were not yet public.

“You can’t convict Raj by splitting hairs,” he told jurors.

Mr. Dowd also sought to dismantle the government’s accusations that Mr. Rajaratnam tried to cover up his crimes. He said prosecutors were “grasping at straws” by showing an instant message in which Mr. Rajaratnam told an associate to call him instead of sending him an e-mail.

“You’ve never sent an e-mail to someone and said, ‘Call me?’ ” he asked jurors.

Mr. Streeter, the prosecutor, whose rebuttal began near the end of Thursday’s session, tried to simplify what has become an increasingly repetitive back and forth between the government and defense lawyers.

He suggested that the stock charts of the companies that Mr. Rajaratnam was said to have obtained inside information from spoke for themselves. He showed charts from Google and PeopleSupport.

Nearly all the charts showed a spike in the company’s price after the incident under scrutiny.

“The principal argument of the defense as far as I can tell is that this information was public,” he said. “The information that insiders had was not public, and the way you know that is those price charts.”

The jury’s patience with the nearly two-month long trial appeared to wear thin. As Mr. Streeter continued his summation past 5 p.m. — the hour at which the court usually breaks for the day — two jurors groaned. Another rolled her eyes and put on her coat. The prosecution continues its rebuttal on Monday. There will no court session on Friday.

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