ANALYSIS: Wiretap Evidence Raises the Bar for U.S. Insider Trading Convictions Following Rajaratnam Verdict

The most far-reaching consequences of Raj Rajaratnam’s trial and conviction last month on the 14 securities fraud and conspiracy counts he was facing will undoubtedly result from the fact that the verdict was delivered by jurors who had listened to 45 different wiretap recordings in court. The efforts to aggressively use wiretaps, unprecedented in insider trading probes prior to the one that ultimately ensnared Rajaratnam, will surely become a staple of major insider trading investigations for years to come.

Indeed, government investigators must now be cognizant of the fact that jurors in future trials of individuals charged with insider trading or similar offenses will have elevated expectations of being able to not only see the documents and other conventional evidence of insider trading, but will expect to hear the taped conversations of those charged with the crimes. Jurors’ post-verdict comments to the press indicated that they convicted Rajaratnam based upon the combined strength of conventional evidence and the multitude of wiretap recordings.

Once the court allowed wiretap evidence over defense objections, the recordings served to corroborate testimony of government witnesses, fill in gaps in documentary evidence, and introduce indicia of suspicious activity, creating a very difficult case for Rajaratnam to overcome…

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