Rajaratnam lawyers ready to “rock” for March trial

•  Lawyers spar over stocks added to charges, experts

• Closely watched insider trading trial starts March 8

NEW YORK (Reuters) - The defense team for accused Galleon hedge fund founder Raj Rajaratnam is ready to “rock” for his criminal trial next month on insider trading charges.

In court last week for the final pretrial hearing, the smartly-dressed Rajaratnam briefly stood for the formality of responding to a second superseding indictment returned by a grand jury on Jan. 20.

“Yes, Your Honor,” and “Not Guilty, Your Honor,” Rajaratnam said in response to questions from U.S. District Judge Richard Holwell, who will preside over the six- to eight-week long trial starting on March 8.

Onetime billionaire Rajaratnam is charged with conspiracy to commit securities fraud and securities fraud, which together carry a prison sentence of up to 25 years.

He was arrested and charged in October 2009, the central figure in what U.S. prosecutors describe as the biggest probe of insider trading at hedge funds on record.

Out of about two dozen people charged in two purportedly linked insider trading networks, 19 have pleaded guilty instead of going to trial.

The case is also marked by investigators’ unprecedented use in a white-collar probe of telephone tape recordings to gather evidence.

“We’ll rock on March 8,” Rajaratnam’s main lawyer, Washington defense attorney John Dowd, said after the hearing in U.S. District Court in New York. “It was helpful to tee things up for the judge on the tapes.”

The court heard that the government could introduce as many as 173 tape recordings to the jury. Last November, Rajaratnam lost a bid to suppress the government’s wiretap evidence.

Prosecutors declined to comment after the hearing.

In a linked case involving traders and some former Galleon employees, a judge ordered a hearing for March 9 to assess whether there was “unnecessary intrusion” by FBI agents on monitored personal calls between defendant Craig Drimal and his wife.

Drimal, who worked in the Galleon office but was not an employee, has pleaded not guilty, as have four others in that case.

Judge Holwell, who last week postponed the start of Rajaratnam’s trial to March 8 from Feb. 28, ruled that he did not see evidence of “intentional sandbagging” after defense lawyers challenged the government’s addition of stocks to the case in December and January.

The allegations of insider trading against Rajaratnam center on a total of 35 stocks, mostly of technology companies.

 Galleon had $7 billion under management at its peak.

A defense attorney, Terence Lynam, told the judge that the 35 stocks represented less than one per cent of the total of thousands of trades conducted by Rajaratnam.

Among the companies on which Rajaratnam is accused of receiving or passing on information between 2003 and March 2009 are Advanced Micro Device Inc (AMD.N), Google Inc (GOOG.O), Goldman Sachs Group Inc (GS.N), Atheros Communications Inc (ATHR.O) and Hilton Hotels Corp.

The government must prove that Rajaratnam knew that information he received and on which he traded was provided by insiders who had a fiduciary duty to keep information confidential about company earnings reports or mergers and acquisitions.

Federal prosecutors accuse Rajaratnam of making as much as $45 million in trades from confidential information about publicly traded companies.

A prosecutor, Reed Brodsky, and defense lawyer Lynam, sparred in court over expert witnesses that the defense could call to testify at trial.

“Every day that passes without the government knowing, hurts the government,” Assistant U.S. Attorney Brodsky said.

Lynam said he would file a written response on expert witnesses and audio recordings by Friday.

The judge ruled that the jury could hear certain evidence about profits to the Galleon funds from which Rajaratnam would also have benefited.

The cases are USA v Raj Rajaratnam, U.S. District Court for the Southern District of New York, No. 09-01184 and USA v Goffer No. 10-00056.

Rajaratnam’s lawyer Dowd - a man for big cases

Reuters) - For seasoned defense lawyer John Dowd, the insider trading trial of Galleon Group hedge fund founder Raj Rajaratnam is one more big assignment in a long career of high-profile cases.

Dowd, perhaps best known for investigating bets on baseball by Cincinnati Reds great Pete Rose, has over the years represented people from U.S. Senator John McCain to an executive who played a key role in the Enron Corp scandal.

Now he is defending Rajaratnam, the central figure in the broadest Wall Street insider trading case in a generation.

A hallmark of the investigation was the U.S. government’s use of secret recordings of suspects, tactics usually reserved for organized crime probes or narcotics cases.

Prosecutors accuse Rajaratnam of making as much as $45 million between 2003 and March 2009 on inside tips about Google Inc (GOOG.O), eBay Inc (EBAY.O), Intel Corp (INTC.O) and other companies. He has pleaded not guilty and will stand trial in New York starting on March 8.

The charges announced in October 2009 and accusations against two dozen others shocked the $1.9 trillion hedge fund world.

Rajaratnam’s arrest also sent jolts through his native Sri Lanka, initially knocking 5 percent off the stock market.

Dowd, 69, has proved to be a tough defender of his wealthy client, challenging the government’s wiretaps and the prosecution’s theory of what constitutes insider trading.

“It is legal to trade stock, and the law does not place a person’s liberty at risk simply because he trades in the company’s stock while knowing something about the company,” the Washington-based lawyer wrote in court papers in early February.

Insider trading cases can be difficult for the government to prove at trial. It must convince a jury that a defendant knew he or she was trading on material, nonpublic information.

Dowd took the case 10 days after the arrest of Rajaratnam, whose Galleon Group managed $7 billion at its peak.

RAPPORT WITH CLIENTS

At more than 6 feet tall and with his bearish physique, former U.S. Marine Corp Captain Dowd has towered over the lectern or defense table in pretrial hearings in Manhattan federal court. His longtime colleague, Terence Lynam, usually sits beside him, and Rajaratnam fills a chair behind them.

Lawyers who know Dowd praise his legal skill and rapport with clients.

Sam Buell, a former federal prosecutor who investigated Enron after the energy company’s 2001 collapse, said Dowd “was very easy to deal with,” not an ‘in-your-face’ type of defense attorney.”

Dowd’s client, David Delainey, was one of the highest-ranking Enron officials to plead guilty and cooperate in the fraud probe of top executives Jeffrey Skilling and Kenneth Lay.