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Galleon Trial Goes ‘Down the Rabbit Hole’

MANHATTAN (CN) - The torrents of wiretaps, e-mails and testimony used by the government to implicate billionaire Raj Rajaratnam in the largest insider-trading scheme in history are straight out of "Alice in Wonderland," a defense attorney suggested in his second day of summations Thursday.

To believe that the evidence points to Rajaratnam's guilt, jurors would need to go "down the rabbit hole," defense attorney John Dowd insisted, referencing Lewis Carroll's classic tale.

In rebuttal summations, Assistant U.S. Attorney Jonathan Streeter conjured a different image of a spiral, saying that Dowd inundated jurors with a "blizzard of information," consisting of news articles and analysts reports available to any trader.

Rajaratnam, a co-founder of the Galleon hedge fund, had a unique advantage over investors wading through this blizzard," he countered.

"That advantage is called insider trading," Streeter said. "And it's a crime."

Prosecutors base their allegations against Rajaratnam on dozens of wiretapped phone calls, hundreds of documents and several witnesses.

More than 15 people have pleaded guilty to participating in the scheme. Three of them have taken the stand against Rajaratnam, and others have had their voices heard in the case through government wiretaps.

Despite this evidence, Dowd dismissed the government's case as "silly," "make-believe" and "imaginary." He contrasted the prosecutors' case with what he said happened in the "real world" more than five times.

Educated at Atlanta's Emory School of Law, Dowd speaks in a steady, dispassionate drawl that contrasts his broadsides against government witnesses.

He called cooperating witness Anil Kumar "the worst liar to take the stand in any courtroom in this building."

Kumar, a former executive of the consulting firm McKinsey, testified that Rajaratnam paid him more than $1 million to give him tips about the firm's clients.

Intel executive Rajiv Goel, who told jurors that he gave his company's inside information to Rajaratnam, was "belligerent, hostile and downright bizarre," Dowd said.

The jury could not believe "a word" of the testimony of former Galleon executive Adam Smith, who testified to tipping Rajaratnam in coded emails, Dowd concluded.

Dowd used some variation of the word "lie" more than 30 times to describe the actions of government witnesses.

Streeter countered that even if jurors did not have trust the government's witnesses, the evidence corroborated all of their testimony.

Kumar, for example, testified that he received e-mails about a merger involving computer chip-maker ATI Technologies, and he called Rajaratnam shortly after to share that information. He said that Rajaratnam called him "a hero" after the deal happened.

Phone and e-mail records confirm the timing and substance of the testimony, Streeter said.

Likewise, defense attorneys had no explanation to why Adam Smith would write private e-mails to his boss in code, Streeter said.

He added that Dowd simply misstated Goel's testimony.

Dowd was likewise critical of the witnesses the government did not call.

"All you saw was a photo of [former Galleon employee] Roomy Khan," he said.

Khan's alleged tips comprise a fifth of the government's charges against Rajaratnam. Another fifth are related to Danielle Chiesi, who pleaded guilty in January and also did not testify.

"Let that sink in for a minute," Dowd said. "This is supposed to be an insider-trading case, but you never heard from [these alleged] insiders."

Although jurors did not hear their voices from the stand, Chiesi was heard on wiretaps, allegedly tipping, flirting and fretting over the government investigation that eventually brought her down with Rajaratnam.

Dowd answered the more than 40 wiretaps deployed against Rajaratnam with another sarcastic remark.

"The government is acting like it's a major event every time people talk on the telephone," he said.

Dowd said that the incriminating portions of Chiesi's obscenity-laced chats with Rajaratnam, whom she called "baby" and "love," started and ended with her.

When Rajaratnam told her to keep "radio silence" about trades, he was telling her not to "blab" his strategies to Wall Street, Dowd said.

"If there was anyone in the world who needs to take that advice, it's Danielle Chiesi," Dowd said, to cackling in the court.

Streeter said that he was warning her against exposing illegal trades.

"Why do you need to be 'radio silent' about something if everyone knows it," he said.

When Chiesi worried about being investigated, Rajaratnam told her to "buy and sell," a wiretap showed.

Dowd said Rajaratnam was just sharing a trading strategy, not trying to mislead investigators, with whom he shared Galleon's "transparent records."

"That's some cover-up," Dowd scoffed.

Streeter said that Rajaratnam was establishing a counterintuitive trading pattern to record an alibi.

"It's about having something to point to when the regulators come around," Streeter said.

Toward the end of the day, a hearing was scheduled for former Goldman Sachs board member Rajat Gupta, a central figure in the Rajaratnam case.

Gupta recently sued the Securities and Exchange Commission for allegedly violating his due-process rights.

The government believes that Gupta passed on inside trades about Goldman Sachs to Rajaratnam, who told a colleague in a wiretap that he was fed confidential information from a member of the bank's board.

While Gupta has been charged for civil violations, Rajaratnam faces criminal charges that carry a possible 25-year sentence.

The government's rebuttal summation continues on Monday.

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