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Rajaratnam Says FBI Recorded ‘Idle Chit-Chat’

MANHATTAN (CN) - Prosecutors lampooned a defense attorney's "idle chit-chat" description of wiretapped conversations that lend credence to charges that the billionaire co-founder of the Galleon hedge fund made $45 million as the ringleader of the biggest insider-trading scheme in history.

The government has played more than a dozen "chit-chats" between Galleon executive Raj Rajaratnam and star witness Rajiv Goel during approximately 15 grueling hours of testimony stretched over the course of four days.

Goel, a former Intel executive, testified that the FBI recorded him passing along confidential information about Intel's quarterly earnings and $1 billion investment into the broadband internet company Clearwire.

Defense attorney Terence Lynam tried to frame the recordings as a collection of "jokes" between two old friends and chatter about legal business interactions. (Goel testified last week that he became "very good friends" with Rajaratnam after they studied business together at University of Pennsylvania's prestigious Wharton School.)

Assistant U.S. Attorney Reed Brodsky bristled at that depiction of the conversations, and asked Goel a series of questions on redirect to discredit the idea that they were any laughing matter.

One wiretap showed Goel telling Rajaratnam, "The Sprint thing is not happening in the short term, OK?" It marks an apparent reference to the expected partnership between Sprint and Clearwire on nationwide broadband.

"Were you joking?" Brodsky asked.

Goel confirmed that he was not.

"Was that idle chit-chat?" Brodsky pressed.

Goel said no again.

Brodsky repeated this line of questioning with statements Goel made about board meetings, proposed dates for public announcements and the progress of investment talks.

Goel confirmed that none of this information was said in jest.

On re-cross, Lynam maintained that it was all "idle chit-chat" because Goel was unaware of the final terms of the Clearwire deal.

Goel countered that business negotiations are "fluid," but he gave Rajaratnam tips that were accurate and privileged at the time.

Wiretaps also captured Goel and Rajaratnam in moments of lighthearted banter.

In one wiretap, Goel told Rajaratnam: "I just called to say you're a good man."

Rajaratnam quipped that the statement was "highly suspicious."

During cross-examination, Goel said that Rajaratnam was a "very generous" friend in helping him financially during times of personal and family crisis, but he indicated that his opinion has changed since that time.

"At the time, he was [a good man]," Goel said.

After Goel's testimony, the government called Rick Muscha, a senior director of investor relations at the computer chip maker Xilinx.

Prosecutors believe that former Xilinx executive Kris Chellam, who eventually worked for Galleon, gave Rajaratnam confidential information about the company's earnings.

Under cross-examination, Muscha said that he never witnessed any illicit conversations between Chellam and Rajaratnam.

On Tuesday the government is expected to begin taking testimony from Adam Smith, a former Galleon executive who is one of the more than 15 alleged associates and tipsters that have pleaded guilty to the alleged inside trading conspiracy. After the jury left Monday, U.S. District Judge Richard Holwell said he was leaning toward denying the government's request to question Smith about a conversation that he had with Rajaratnam's brother about an alleged cover-up of the conspiracy.

On the morning of Rajaratnam's arrest, prosecutors say that Smith saw Rengan Rajaratnam "carting away" notebooks from the Galleon executive's office. When they met months later, Rengan told Smith not to tell the government about the incident, prosecutors say.

Holwell appeared to sympathize with Lynam's argument that this evidence constitutes hearsay because it implies without evidence that Rengan acted at his brother's direction, and Raj has not been charged with obstruction.

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