Guilty Verdict In U.S. Rajaratnam Insider Trading Trial May ‘Embolden’ Federal Prosecutors
May 16, 2011 in World Securities Law Report
By a BNA Staff Correspondent.
NEW YORK—The May 11, 2011, guilty verdict in the insider trading trial of former Galleon Management LLC general partner Raj Rajaratnam may “embolden” federal prosecutors to use increasingly aggressive tactics during insider trading cases, former prosecutors told BNA.
A federal jury May 11 found Rajaratnam guilty on all nine counts of securities fraud and all five counts of conspiracy to commit securities fraud asserted against him in the government’s largest hedge fund insider trading case in history. He faces a statutory maximum of 205 years’ imprisonment, but the former prosecutors said Rajaratnam’s sentence will not be nearly that long.
Akin Gump Strauss Hauer & Feld LLP partner and Rajaratnam lawyer John M. Dowd in a May 11 statement said his client intends to appeal the decision. “We will see you in the second circuit,” said the statement, referring to the U.S. Court of Appeals for the Second Circuit.
U.S. District Judge Richard J. Holwell is scheduled to sentence Rajaratnam July 29, 2011; Rajaratnam is free on bail until that date.
Prosecution Techniques Include Wiretaps
The conviction will “embolden” the Justice Department in its fight against insider trading, and financial crime prosecutors will continue using the same types of investigative techniques in other insider trading cases, Vinson & Elkins LLP partner Rita M. Glavin told BNA May 11.
“[S]earch warrants, wiretaps, cooperators wearing body wires to get information, all of these tactics—these types of techniques have been very successful in the street-crime world, in the organized crime world, the gang world, narcotics-trafficking world, and you’re now seeing them used in these securities-violation cases and the white collar world,” Glavin said.
“Look, [the Justice Department is] always bringing these cases. You look at the [former WorldCom Inc. Chief Executive Officer] Bernie Ebbers case. You look at Enron. But in those cases you didn’t have wiretaps, you didn’t have people wired up and going in and having conversations with bosses, with friends. You did not see a search warrant executed at WorldCom,“ Glavin said.
Prosecutors getting more aggressive in white-collar cases “was happening when I was there, it was beginning to happen,” said Glavin, who worked for the Justice Department from 1998 to 2010, including serving as head of the department’s criminal division.
‘Had to Win’ Case
Indeed, with all of the different tactics utilized by prosecutors and the amount of resources devoted to the Rajaratnam prosecution, a guilty verdict was a virtual necessity for the government, Stuart D. Meissner, a former prosecutor in the Manhattan District Attorney’s office as well as the New York Attorney General’s office, told BNA May 11.
“They had to win this case. There’s no question about it. The government had everything going for it, from wiretaps to cooperators to an enormous gathering of evidence equivalent to an organized crime prosecution,” said Meissner, who represented a former Galleon employee questioned by prosecutors but never called to testify during the trial. Meissner did not identify his client.
“They put a lot of resources into this case, and if they couldn’t get a conviction in this case, it would call into question the ability to get a conviction on any insider trading case,” he said. His client cooperated with prosecutors in the case, Meissner said.
The guilty verdict is a significant victory for U.S. Attorney for the Southern District of New York Preet Bharara, who has stated publicly he is unafraid to use aggressive means to develop insider trading cases, particularly in the face of alleged law violators determined to conceal their actions by trickery and deceit.
Since Bharara became U.S. attorney August 13, 2009, his office has charged 47 individuals with insider trading crimes. A total of 36 of those individuals—including Rajaratnam—had been convicted as of May 11…