Raj Rajaratnam, founder of Galleon Group, is facing legal charges after generating millions of dollars in illicit profits. According a U.S. prosecutor, Rajaratnam used a "corrupt network" of consultants and company insiders to retrieve information that helped him obtain his fortune currently under question.
Assistant U.S. Attorney Jonathan Streeter said in New York federal court that the case is centered on "greed and corruption." He added that Rajaratnam used corrupt insiders to get "tomorrow's business news today."
Defending attorney John Dowd countered Streeter's comments by claiming Rajaratnam's actions were of no violation or crime, and that he traded only on publicly available information and research conducted by Galleon. Dowd pointed out to the jury that the government has it wrong and "failed to do its homework."
The dispute unveiled what many foresee being a drama-packed, ten-week legal battle touching on, among other things, allegations of sex, lies and audiotapes. Top lawyers observing the case emphasized that the opening statement is critical during criminal trials, and jurors are often won over by the initial argument or not at all.
Prior to the opening statements, a 12-member jury of New Yorkers was swore in, each over the age of 45 years old. A majority of the jury told the judge that they were unfamiliar with Rajaratnam's Galleon Group or any of the company insiders who are destined for the stand.
The case against Rajaratnam is significant battle with something at stake for both sides. Manhattan U.S. Attorney Preet Bharara emphasizes the legal implications of insider trading a focus, and how the outcome could influence other related investigations conducted by his office.
Mr. Rajaratnam, if convicted, could face up to 20 years in prison on 14 counts of conspiracy and securities fraud.
One Roanoke business lawyer with experience handling cases of insider-trading pointed out that such cases can be "a challenge to argue", and that the success of the prosecutors will hinge on their ability to sustain jurors' focus on the evidence.
The Galleon case is the first trail involving insider-trading where the core evidence lies in almost 90 hours of telephone conversations. The government's intercepted recordings, which will drive a roster of witnesses to the stand for questioning, defense lawyers say.
The crux for prosecutors is ensuring that jurors do not become overwhelmed with evidence and to argue their case in the clearest manner possible.
The prosecution's opening statement was an underscore to the issues involving insider trading and the related challenges the government faces in regulating such fraudulent activity.
Attorney Jonathan Streeter stated his allegations in clear terms to the court: "People at Galleon did their homework, but they cheated, too. And that cheating is called inside information."
Mr. Streeter repeatedly alleged that the defendant purchased and sold shares based on inside information and made an effort to "cover his tracks." He added that Rajaratnam would most likely counter the allegations with emails, making it seem as if his actions were based on legitimate research.
"Both sides are making valid, persuasive arguments. This case should keep us (the audience in the courtroom) on the edge of our seats." said an observing Dayton business lawyer
According to Rajaratnam's attorney, he operated a sound business that used a "mosaic" of research to make trading decisions about companies and "built his success on shoe-leather research."
Mr. Dowd also added: "In the real world, there's nothing wrong with talking about stocks or researching stocks."
Galleon spends roughly $300 million a year on research and traded millions of shares every year, and the alleged trades only accounted for a fraction of the trades Rajaratnam's company made annually, Mr. Dowd said.
Prosecutors plan to sharpen their case strategy by focusing on a select group of witnesses, who claim were involved in the alleged trading as well as the telephone recording with Mr. Rajaratnam in which he discussed improper trades. In the upcoming proceedings, Mr. Streeter and the team of top attorneys will play two of the recordings from 2008 during which the defendant allegedly told his staff at Galleon that he had received tips regarding Goldman Sachs Group Inc.
The inside information being pressed on Rajaratnam included a $5 billion investment by Warren Buffett's Berkshire Hathaway Inc. in Goldman at the peak of the economic meltdown, Mr. Streeter said.
Just minutes of receiving the Berkshire tip, Rajaratnam ordered a stock purchase worth $43 million of Goldman shares, Mr. Streeter said. Only $27 million of the order was fulfilled in the short time before the New York Stock Exchange closed, Mr. Streeter said. He also said that after the close and the Berkshire investment was announced, Rajaratnam profited a quick $1 million on the trade.
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