Defense Counsels Hired For 'Not Your Garden Variety Insider Trading Case'?

[WSJ_law_blog]

Preet Bharara, U.S. Attorney for New York’s Southern District sent a message to Wall Street Friday with the arrest of Raj Rajaratnam (center), the founder of Galleon Group, a New York-based fund firm that manages $3.7 billion, and five others for their alleged involvement in a $20 million insider trading ring.

Lest we miss the significance of this, Bharara intoned at a news conference: “This is not a garden-variety insider-trading case. This case represents the largest hedge-fund insider-trading case ever charged criminally.” Bharara (shown below) also said he believed it was the first time that prosecutors had used a wiretap in an insider-trading case. The SEC brought separate civil charges.



Others charged criminally in the case include Rajiv Goel, an Intel Corp. employee involved in Intel’s investments; Anil Kumar, a director at global management-consulting firm McKinsey & Co.; Danielle Chiesi and Mark Kurland of New Castle Partners LLC, the one-time equity hedge-fund group at Bear Stearns Asset Management Inc.; and Robert Moffat, a senior vice president at International Business Machines Corp. (IBM).

The allegations put Rajaratnam at the center of several insider trades in which he allegedly caused Galleon funds to act on inside information or passed along tips to others. Robert Khuzami, the SEC’s director of enforcement, said of Rajaratnam: “He is not a master of the universe; he’s a master of the Rolodex.” Here’s the WSJ story by Jenny Strasburg and Dow Jones’ Chad Bray, which includes tidbits such as this:

What were described as wiretap snippets suggested audacity but also at times nervousness. “I swear to you in front of God … you put me in jail if you talk,” Ms. Chiesi told an unnamed alleged co-conspirator, the filings say. “I’m dead if this leaks. I really am…. and my career is over. I’ll be like Martha f — ing Stewart.’”

However, Jim Walden, a lawyer with Gibson, Dunn & Crutcher LLP who is representing Rajaratnam, said he believed the government’s theory in the case was novel, noting prosecutors had argued in part that Rajaratnam encouraged an alleged co-conspirator to leave an email trial in order to help conceal the scheme. “Isn’t it usually the other way around?,” Walden asked.

He also said that prosecutors and investigators appeared to have misconstrued terms Rajaratnam used in his business, such as radio silence. “They don’t understand the business Mr. Rajaratnam was legitimately employed in,” Walden said.

Some of the other lawyers involved, at least initially, Friday were:
–Charles E. Clayman of Clayman & Rosenberg for Kumar: “He is a man of integrity and honesty. He emphatically denies these charges,” Clayman said.
–Kerry A. Lawrence of Briccetti, Calhoun & Lawrence, LLP for Moffat: Lawrence said his client was “shocked” by the criminal charges. “We look forward to a favorable resolution of the case,” he said.
–Lawrence Iason of Morvillo, Abramowitz, Grand, Iason, Anello & Bohrer, P.C. for Kurland. Iason declined comment on behalf of his client.
–Alan R. Kaufman of Kelley Drye & Warren LLP for Chiesi. He also declined comment on behalf of his client.
A lawyer for Goel could not be immediately located.

Photos: Associated Press