NEW YORK (Reuters) - A federal appeals court will hear oral arguments on October 25 in hedge fund founder Raj Rajaratnam’s bid to overturn his insider trading conviction on grounds that the U.S. government improperly won permission to record his phone conversations.
One-time billionaire Rajaratnam, 55, is serving an 11-year prison sentence in what prosecutors called the biggest insider trading case of a generation. Rajaratnam was the principal defendant among dozens of money managers, traders, consultants and lawyers caught up in a crackdown in the past four years of Wall Street insiders illegally obtaining company secrets and trading on the information.
A panel of three judges on the 2nd U.S. Circuit Court of Appeals in New York will allow prosecutors and Rajaratnam’s lawyers 15 minutes each to make their arguments, according to the court’s calendar. Usually, the panel does not issue a decision until weeks or even months after oral arguments.
Rajaratnam was convicted in May 2011 in Manhattan federal court on 14 counts of securities fraud and conspiracy, largely based on the FBI’s secret recordings of his conversations, which were played to the jury.
Wiretaps historically have been used in investigations of organized crime groups and drug trafficking. Their use in a white-collar crime probe was seen as a significant expansion by the government.
Rajaratnam lost a bid in November 2010 to suppress the wiretaps as evidence in his trial.
His lawyers argued then, as they do in their appeals briefs, that investigators did not meet the requirements under Title III, a federal statute that governs the use of wiretaps.
Rajaratnam’s lawyers contend that when the FBI applied to a federal judge to tap his cell phone in March 2008, the affidavit did not provide the judge with all of the information required for approval under the law.
One fact omitted was that a government informant, Roomy Khan, had been convicted of wire fraud in the late 1990s after providing Rajaratnam with inside information.
“The government argues that this Court must close its mind to the truth and accept its pervasively misleading affidavit at face value because it was not ‘outright false’; it was just filled with intentionally misleading ‘omissions,’” lawyers at Akin Gump Strauss Hauer & Feld, who represent Rajaratnam, said in papers filed in the appeal.
Federal prosecutors, in their brief to the appeals court, noted that six judges approved the wiretaps of Rajaratnam between March 2008 and November 2008.
“The issuing judges’ findings were validated by the wiretap investigation, which uncovered highly incriminating evidence of wide-ranging insider trading schemes involving Rajaratnam and others,” the government brief said.
One of the other defendants, former Intel Corp (INTC.O) executive Rajiv Goel, is seeking a noncustodial punishment when a judge sentences him on September 12, according to court filings on Friday. Goel, a onetime friend and business associate of Rajaratnam, was among several people who testified against the money manager at his trial.
Prosecutors said Goel “substantially aided” the prosecution of Rajaratnam. Goel pleaded guilty to securities fraud and conspiracy charges after he admitted telling his friend about confidential Intel information in 2007 and 2008.
The cases are USA v Raj Rajaratnam, 2nd U.S. Circuit Court of Appeals No. 11-4416 and USA v Rajaratnam in U.S. District Court for the Southern District of New York No. 09-01184.
Reporting by Grant McCool; Editing by Martha Graybow, Richard Chang and Matthew Lewis