“Greed and corruption — that’s what this case is all about,” a federal prosecutor said on Wednesday at the trial of Raj Rajaratnam, the billionaire hedge fund manager accused of being at the center of a huge insider trading ring.
Mr. Rajaratnam’s lawyer countered that “the government has it wrong,” portraying his client as one who made his fortune through “shoe-leather research, diligence and hard work” and who “conducted the best research in the business.”
Before a packed courtroom in Lower Manhattan, the two opposing lawyers — Jonathan Streeter, an assistant United States attorney, and John Dowd, Mr. Rajaratnam’s lead lawyer — previewed the evidence that the jury is expected to hear over the course of the trial, which is expected to last 10 weeks.
Much of the government’s case is based on more than 2,400 secretly recorded telephone conversations that Mr. Rajaratnam had, many of them with cooperating witnesses who have already pleaded guilty to insider trading.
Brendan McDermid/ReutersJohn Dowd, Raj Rajaratnam’s lead lawyer, argued that his client made a fortune through good research.
Brendan McDermid/Reuters Raj Rajaratnam on Wednesday, after the opening arguments in his case.“He knew tomorrow’s business news today and traded on it,” Mr. Streeter said. “One crucial thing he didn’t know. He didn’t know the F.B.I. was listening.”
The prosecutor highlighted for the jury four of Mr. Rajaratnam’s associates and their alleged insider trading schemes with Mr. Rajaratnam: Anil Kumar, a former partner at McKinsey & Company and a business school classmate; Rajiv Goel, a former Intel executive and also a business school classmate; Adam Smith, a Galleon portfolio manager; and Rajat K. Gupta, a former board member of Goldman Sachs and Procter & Gamble. Three of them have pleaded guilty and are cooperating with the government.
Among the more dramatic moments in the opening statements came when Mr. Streeter laid out Mr. Gupta’s role in the case. Last week, the Securities and Exchange Commission accused Mr. Gupta of sharing confidential information about Goldman and P.& G. with Mr. Rajaratnam. The S.E.C. allegations did not include any specific details of conversations between the two men.
On Wednesday, Mr. Streeter focused on Mr. Gupta’s alleged tip to Mr. Rajaratnam that the Goldman board had just approved a $5 billion investment from Warren E. Buffett in the middle of the financial crisis. Minutes later, Mr. Rajaratnam bought a large amount of Goldman stock, the government says.
Mr. Streeter said the government planned to play a recording of a conversation between Mr. Rajaratnam and a Galleon colleague that took place the next day during which Mr. Rajaratnam explained that “something good is going to happen for Goldman.” (The defense disclosed that the colleague was David Lau, who worked in Singapore.)
Mr. Rajaratnam’s lawyer disputed that any of these conversations or relationships amounted to a criminal conspiracy. He made it clear that the mosaic theory of investing — collecting detailed, disparate information about a company to form a “mosaic” — would be a key theme of Mr. Rajaratnam’s defense.
“He assembled a mosaic of information and did his own calculations,” Mr. Dowd said. “The evidence will show that Raj did not cheat.”
The government acknowledged that much of Galleon’s trading was backed by sound security analysis. “People did legitimate stock research, but they cheated, too,” Mr. Streeter said. “And that cheating is called insider trading.”
Mr. Dowd sought to minimize the significance of the trades that form the basis of the government’s insider trading charges.
The trades in question accounted for just 1 percent of all trading at Galleon, which bought and sold stocks “at a dizzying pace” that amounted to billions of dollars annually, Mr. Dowd said. What’s more, he argued, the controversial trades did nothing to increase his returns.
“If that doesn’t make any sense, it’s because it doesn’t make any sense,” he said.
The two lawyers’ styles and strategies during opening statements were markedly different. Mr. Streeter, the prosecutor, zeroed in on just a few instances of alleged insider trading by Mr. Rajaratnam. Though there are more than 100 potential witnesses and more than 50 companies whose names could come up at trial, Mr. Streeter, who spoke for an hour, mentioned only a handful, focusing on what the government likely considers the strongest evidence of insider trading.
Mr. Dowd used the government’s uncluttered approach against it. “Unlike Mr. Streeter, I’m going to tell you about the entire case,” he said.
He did not disappoint. The defense lawyer’s opening statement was hyper-detailed, naming dozens of companies in a presentation that clocked in at one hour and 40 minutes.
While Mr. Streeter used no visual aids, Mr. Dowd posted more than 30 pages of memos on an overhead display in the courtroom. Each focused on a company in which Mr. Rajaratnam is accused of trading on illegal tips. Mr. Dowd took the jury through each trade, arguing that the evidence would show no evidence of insider trading — either the news passed to Mr. Rajaratnam was already public or it was bad information that caused Mr. Rajaratnam to lose money.
The government countered that it did not have to prove that Mr. Rajaratnam profited on his trades. “Insider trading is insider trading even if it doesn’t work every time,” Mr. Streeter said.
Mr. Dowd criticized the government for barely mentioning, or not mentioning at all, cooperating witnesses like Danielle Chiesi and Roomy Khan, both of whom have pleaded guilty to insider trading crimes. He described Ms. Chiesi as a drama queen who never had any inside information and Ms. Khan as a liar who was “playing the government like a violin” in order to get a reduced prison sentence.
Mr. Streeter appealed to the jury of ordinary New Yorkers by suggesting that Mr. Rajaratnam had an unfair edge over investors on Main Street.
“Secret information that other people don’t have is a very valuable thing in the stock market,” Mr. Streeter said, noting that the New York Stock Exchange was just a few blocks from the courthouse “where ordinary investors can buy and sell stocks.”
Five men and seven women have been seated on the jury. Among them are two employees of the Department of Education and two from the Metropolitan Transportation Authority. One jury member works at an office job at Verizon; another for Apple, as a graphic designer.
Underscoring the case’s importance, Preet Bharara, the United States attorney in Manhattan, sat in the back of the spectators’ gallery with Richard Zabel, head of the office’s criminal unit. The prosecutors’ family members were also present, including Mr. Streeter’s wife and the mothers of the two other prosecutors in the case.
The prosecutor highlighted for the jury four of Mr. Rajaratnam’s associates and their alleged insider trading schemes with Mr. Rajaratnam: Anil Kumar, a former partner at McKinsey & Company and a business school classmate; Rajiv Goel, a former Intel executive and also a business school classmate; Adam Smith, a Galleon portfolio manager; and Rajat K. Gupta, a former board member of Goldman Sachs and Procter & Gamble. Three of them have pleaded guilty and are cooperating with the government.
Among the more dramatic moments in the opening statements came when Mr. Streeter laid out Mr. Gupta’s role in the case. Last week, the Securities and Exchange Commission accused Mr. Gupta of sharing confidential information about Goldman and P.& G. with Mr. Rajaratnam. The S.E.C. allegations did not include any specific details of conversations between the two men.
On Wednesday, Mr. Streeter focused on Mr. Gupta’s alleged tip to Mr. Rajaratnam that the Goldman board had just approved a $5 billion investment from Warren E. Buffett in the middle of the financial crisis. Minutes later, Mr. Rajaratnam bought a large amount of Goldman stock, the government says.
Mr. Streeter said the government planned to play a recording of a conversation between Mr. Rajaratnam and a Galleon colleague that took place the next day during which Mr. Rajaratnam explained that “something good is going to happen for Goldman.” (The defense disclosed that the colleague was David Lau, who worked in Singapore.)
Mr. Rajaratnam’s lawyer disputed that any of these conversations or relationships amounted to a criminal conspiracy. He made it clear that the mosaic theory of investing — collecting detailed, disparate information about a company to form a “mosaic” — would be a key theme of Mr. Rajaratnam’s defense.
“He assembled a mosaic of information and did his own calculations,” Mr. Dowd said. “The evidence will show that Raj did not cheat.”
The government acknowledged that much of Galleon’s trading was backed by sound security analysis. “People did legitimate stock research, but they cheated, too,” Mr. Streeter said. “And that cheating is called insider trading.”
Mr. Dowd sought to minimize the significance of the trades that form the basis of the government’s insider trading charges.
The trades in question accounted for just 1 percent of all trading at Galleon, which bought and sold stocks “at a dizzying pace” that amounted to billions of dollars annually, Mr. Dowd said. What’s more, he argued, the controversial trades did nothing to increase his returns.
“If that doesn’t make any sense, it’s because it doesn’t make any sense,” he said.
The two lawyers’ styles and strategies during opening statements were markedly different. Mr. Streeter, the prosecutor, zeroed in on just a few instances of alleged insider trading by Mr. Rajaratnam. Though there are more than 100 potential witnesses and more than 50 companies whose names could come up at trial, Mr. Streeter, who spoke for an hour, mentioned only a handful, focusing on what the government likely considers the strongest evidence of insider trading.
Mr. Dowd used the government’s uncluttered approach against it. “Unlike Mr. Streeter, I’m going to tell you about the entire case,” he said.
He did not disappoint. The defense lawyer’s opening statement was hyper-detailed, naming dozens of companies in a presentation that clocked in at one hour and 40 minutes.
While Mr. Streeter used no visual aids, Mr. Dowd posted more than 30 pages of memos on an overhead display in the courtroom. Each focused on a company in which Mr. Rajaratnam is accused of trading on illegal tips. Mr. Dowd took the jury through each trade, arguing that the evidence would show no evidence of insider trading — either the news passed to Mr. Rajaratnam was already public or it was bad information that caused Mr. Rajaratnam to lose money.
The government countered that it did not have to prove that Mr. Rajaratnam profited on his trades. “Insider trading is insider trading even if it doesn’t work every time,” Mr. Streeter said.
Mr. Dowd criticized the government for barely mentioning, or not mentioning at all, cooperating witnesses like Danielle Chiesi and Roomy Khan, both of whom have pleaded guilty to insider trading crimes. He described Ms. Chiesi as a drama queen who never had any inside information and Ms. Khan as a liar who was “playing the government like a violin” in order to get a reduced prison sentence.
Mr. Streeter appealed to the jury of ordinary New Yorkers by suggesting that Mr. Rajaratnam had an unfair edge over investors on Main Street.
“Secret information that other people don’t have is a very valuable thing in the stock market,” Mr. Streeter said, noting that the New York Stock Exchange was just a few blocks from the courthouse “where ordinary investors can buy and sell stocks.”
Five men and seven women have been seated on the jury. Among them are two employees of the Department of Education and two from the Metropolitan Transportation Authority. One jury member works at an office job at Verizon; another for Apple, as a graphic designer.
Underscoring the case’s importance, Preet Bharara, the United States attorney in Manhattan, sat in the back of the spectators’ gallery with Richard Zabel, head of the office’s criminal unit. The prosecutors’ family members were also present, including Mr. Streeter’s wife and the mothers of the two other prosecutors in the case.
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