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Saturday, June 15, 2024 | Back issues
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Ex-Galleon Trader’s Wife Back to Drawing Board

MANHATTAN (CN) - Before suing 16 FBI agents, the wife of a Galleon trader convicted of insider trading must beef up her complaint accusing the bureau of snooping on the "intimate" chats she had with her husband, the 2nd Circuit ruled Friday.

It's been four years since Craig Drimal pleaded guilty in Manhattan to conspiracy and five counts of securities fraud amid the spectacular fall of the Galleon hedge fund and its disgraced leader, Raj Rajaratnam.

In the lead-up to his trial, the trader had fought to suppress many of the roughly 180 calls caught in the FBI's dragnet, including chats with his wife, Arlene Villamia Drimal.

Though U.S. District Judge Richard Sullivan ultimately found the bureau's wiretaps "generally well-executed," he commented that he found certain agents' monitoring of husband-and-wife conversations to be "inexcusable and disturbing."

Federal wiretap law authorizes agents to eavesdrop only on conversations that are relevant to their investigation and "minimize" conversations that appear to be personal in nature.

Villamia, the trader's wife, then headed to court in Connecticut with a 2012 federal complaint against the agents she said had listened in on her communications with her husband.

Villamia said agents admitted at the time that they had gone too far, and U.S. District Judge Warren Eginton denied the agents qualified immunity from the lawsuit.

Reversing Friday, a three-judge panel of the 2nd Circuit found that Eginton's decision suffered from two defects.

"First, the District Court erred in finding [Villamia] Drimal's complaint sufficient to plead a violation of Title III because [Villamia] Drimal simply asserted in a conclusory fashion that intercepting marital telephone calls violated Title III without any reference to the duty to minimize," Judge John Walker Jr. wrote for the court. "Second, in evaluating defendants' claims of qualified immunity, the district court ruled on all the defendants as a single group instead of evaluating [Villamia] Drimal's claims against each defendant individually."

Judges Gerard Lynch and Denny Chin concurred.

Once Villamia fashions a new lawsuit, "some [defendant-agents] may be able to successfully claim qualified immunity even at the pleading stage where others may not," the appellate panel predicted.

Villamia's lawyer John R. Williams, from New Haven, Conn., said in an email that her client expected this ruling, but that the judges established an important principle that will help her future legal battles.

"Probably the most important aspect of this ruling is its holding that there is no 'two-minute rule' as the government had been contending," Williams explained. "The government argued that there is never any need for agents monitoring a wiretap conversation to stop listening in less than two minutes. The court in today's ruling says that there is no such rule and that, particularly in a case like this one, it often should be obvious after only a few seconds - either because of the content or because of the identity of the parties - that listening must stop.

"Thus, in this very case, the court has ruled that we will be allowed to proceed against agents who listened for less than two minutes but for longer than they should have," Williams continued. "This is an important ruling in favor of the right of innocent people to be left alone by the government, that mere family relationship with a target of a legal wiretap does not make innocent people 'fair game' for government agents' prurient examination of their intimate lives."

The Department of Justice did not immediately respond to a request for comment.

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