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Rajaratnam Denied Supreme Court Cert

MANHATTAN (CN) - The Supreme Court refused Monday to hear Galleon hedge fund billionaire Raj Rajartnam's appeal of his convictions for a massive insider trading scheme.

Rajaratnam has been serving an 11-year sentence after being convicted of more than a dozen counts of securities fraud in connection to illegal trades in Intel, Akamai, Blackstone, Goldman Sachs, PeopleSupport, Advanced Micro Devices and other companies.

He also had to pay roughly $63.8 million in fines and forfeiture.

Though three cooperating witnesses and reams of documents bolstered the government's case, wiretapped phone calls provided the smoking gun evidence that swayed the jury, press reports of juror interviews have shown.

Rajaratnam's appeals have centered on contesting the admission of those wiretaps.

"For Rajaratnam, this is the end of the line in his appeals, which is a sad day for him and his family, and a victory for the government's use of wiretaps to investigate and prosecute insider trading offenses," his lead prosecutor Reed Brodsky said in a statement.

Brodsky is now a partner in the New York office of Gibson Dunn & Crutcher.

In his 2nd Circuit appeal, Rajaratnam claimed that the wiretaps never should have been played in court because, in the words of U.S. District Judge Richard Holwell, the application to monitor the hedge fund honcho's phone calls contained a "glaring omission."

It did not disclose "that the SEC had for several years been conducting an extensive investigation into the very same activity the wiretap was intended to expose[,] using many of the same techniques the affidavit casually affirmed had been or were unlikely to be successful," Holwell added (brackets in original).

The judge found that the U.S. Attorney's Office acted with a "reckless disregard for the truth," but that this malfeasance was not enough to suppress the wiretaps.

The 2nd Circuit defended the prosecutors' conduct as an unintended error in a decision unanimously affirming Rajaratnam's convictions.

"Based on our review of the record, we conclude that the district court erred in applying the 'reckless disregard' standard because the court failed to consider the actual states of mind of the wiretap applicants," Judge Jose Cabranes wrote for a three-judge panel last year.

"A wiretap applicant does not necessarily act with 'reckless disregard for the truth' simply because he or she omits certain evidence that a reviewing court, in its judgment, considers to be 'clearly critical.' Rather, the reviewing court must be presented with credible and probative evidence that the omission of information in a wiretap application was 'designed to mislead' or was 'made in reckless disregard of whether [it] would mislead.'" (Emphasis in original.)

Even Holwell acknowledged that "no one acted with the deliberate intent to mislead," the panel said.

In his petition, Rajaratnam's lawyers posed two questions for the Supreme Court.

The first asked whether the government must prove that "inside information was a substantial factor in the defendant's trading activities," alluding to arguments that Rajaratnam traded based on a "mosaic" of information other than tips.

A federal jury heard, and rejected, those arguments at trial.

The second question asked "whether wiretap evidence must be suppressed when the government omits and misstates information clearly critical to assessing the legality of a wiretap, instead of providing the 'full and complete statement' required by Title III [of the Wiretap Act]."

Neither of these issues piqued the interest of the Supreme Court, which declined to hear Rajaratnam's case without comment, as is its custom.

Rajaratnam's lawyers at the Akin Gump Strauss Hauer & Feld LLP declined to comment.

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