MANHATTAN (CN) – Witness testimony against the accused ringleader of a $63 million insider-trading scheme ended as it began, with the playing of a wiretap.
Former owner of the Galleon hedge fund, Raj Rajaratnam, has insisted for more than a month of trial that his information came from public speculation, not tips.
But since trial began on March 9, in what prosecutors call the biggest inside-trading case in history, the government has unveiled dozens of secretly recorded wiretaps to prove otherwise.
At the end of the government’s rebuttal case on Monday, prosecutors introduced a wiretap in which Rajaratnam appears to tell Danielle Chiesi, who pleaded guilty to the conspiracy in January, that the information that they have is superior to what the public knows.
In the Sept. 30, 2008, phone call, Rajaratnam and Chiesi accurately predict that computer chip-maker Advanced Micro Device (AMD) will announce an “Asset Lite” program on Oct. 7. (Click here to download the full audio.)
“[I]t’s been widely speculated,” Rajaratnam says in the recording. “What people don’t know is the time.”
Earlier in the trial, cooperating government witness Anil Kumar testified that he warned Rajaratnam to trade on his tip about the deal before Wall Street learned about it, and that Chiesi had an “intimate” relationship with AMD’s then-chairman Hector Ruiz.
As the wiretap begins, Rajaratnam and Chiesi frantically try to figure out who caused a spike in AMD’s stocks, and each assumes the other invested a million shares.
“I mean, come on, somebody just marked it up huge,” Chiesi says.
“I thought it was you, that’s why I called you,” Rajaratnam responds.
“No – I’m not. No, I would tell you. Fuck, if I was going to do that, I would call you,” Chiesi replies on the tape. “No, no, no, no, no.”
“[T]hat’s a very bold move to make,” she adds, “unless you know what we know.”
Ironically, the defense’s star expert witness Gregg Jarrell claimed that Rajaratnam lost about $67 million on his AMD stock, giving him a net loss on the stocks the government accused him of trading illegally.
Assistant U.S. Attorney Jonathan Streeter challenged Jarrell’s statistics on Monday, saying that he arrived at that calculation by tallying trades Rajaratnam made in AMD weeks after the announcement.
After Jarrell’s testimony ended, the defense rested its case, and the government presented a brief rebuttal case by questioning FBI Agent James Barnacle, who testified earlier in the trial.
A former financial adviser turned securities agent, Barnacle testified that Jarrell’s methodology contradicted his own.
Jarrell had insisted otherwise.
Assistant U.S. Attorney Reed Brosky played the tape, the last words the jury heard that day, after Barnacle left the stand.
Closing arguments will begin on Wednesday morning.