Historic insider trading trial starts

The
criminal trial of Galleon Group LLC co-founder Raj Rajaratnam is underway in
New York.

Rajaratnam,
53, is the central figure in the largest crackdown on hedge-fund insider trading in U.S. history.

The
Sri Lankan-born money manager is accused of making $45 million from
confidential information leaked by corporate insiders and hedge fund traders.

He
may spend as long as 20 years in prison if convicted of fraud.

Rajaratnam
denies wrongdoing and has argued that investment advisers routinely speak to
company insiders as they do research.

Since arresting Rajaratnam in
October 2009 and announcing criminal charges against 26 former traders,
executives and lawyers, the U.S. government has pressed ahead with what it
calls the biggest probe of insider trading in the $1.9 trillion hedge fund
industry.

Nineteen people have pleaded guilty
in the case, which stands apart from past insider trading probes because of the
government’s wide-scale use of phone taps.

It is not known whether Rajaratnam
will testify in his own defence after the jury has heard hours of tapes and
testimony from as many as six cooperating witnesses.

Prosecutors say they could present
up to 173 recordings of telephone conversations.

Among those who could be called by
the government to testify is Lloyd Blankfein, chief of Goldman Sachs Group
Inc., according to published reports.

Prosecutors and regulators have
accused former Goldman board member Rajat Gupta of leaking information about
the bank to his friend Rajaratnam, but Gupta has not been criminally charged.

Rajaratnam’s chief defense lawyer,
John Dowd, has fought hard for his wealthy client, arguing that prosecutors
have broadened the definition of insider trading.

A money manager’s liberty should
not be at risk because he trades on a stock while knowing something about the
company, Dowd argues.

The trial is expected to last two
months.

 

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