Business

Accused Hedge Fund Boss’s Trial Could Start Today

Billionaire Galleon Group hedge fund cofounder Raj Rajaratnam departs Manhattan Federal Court - New York, NY - Mar 8, 2011 - Photo: Mario Tama/Getty Images

Galleon Group hedge fund cofounder Raj Rajaratnam (credit: Mario Tama/Getty Images)

corn_feature Irene Cornell
Irene Cornell has been a reporter at WCBS for 40 years, and she still...
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NEW YORK (AP / WCBS 880) - Jury selection began Tuesday in the trial of a hedge fund boss who was one of the richest Americans before he was charged in what prosecutors said was the biggest hedge fund insider trading case in history.

WCBS 880’s Irene Cornell reports from Manhattan

Opening statements were expected to begin sometime Wednesday in Raj Rajaratnam’s trial.

Judge Richard J. Holwell introduced Rajaratnam to prospective jurors in U.S. District Court in Manhattan by calling him “a wealthy individual.” None said he or she would have trouble being fair when Holwell asked if they would be adversely affected by a case involving the financial industry, Wall Street executives and hedge funds.

Rajaratnam was represented in court by seven lawyers as a pool of about 100 potential jurors was questioned by Holwell to make sure they had no personal history or biases that would interfere with their ability to judge the case fairly.

The potential jurors were read a list of more than 80 people who might testify or be mentioned during the trial, including Goldman Sachs Chief Executive Officer Lloyd Blankfein, who reportedly could be called as a witness for the government. None said they knew him. They were also read a list of 50 companies that might be mentioned at the trial, which is projected to last up to 2 months.

Rajaratnam, the founder of the Galleon Group of hedge funds, was charged in October 2009 with securities fraud and conspiracy to commit securities fraud by prosecutors who said he made more than $50 million illegally by teaming up with others in the industry to glean secrets from employees of public companies.

The case has resulted in more than two dozen arrests and 19 guilty pleas, including many people who are cooperating with the government.

Defense lawyers scored a small legal victory Tuesday when the judge said he planned to instruct jurors after he swears them in that Rajaratnam had to have knowledge that anyone providing insider information was breaking a promise, usually to an employer, not to reveal secrets.

Assistant U.S. Attorney Reed Brodsky also asked the judge to be careful how he defines public information when he instructs jurors.

“We just think as it is stated right now it could lead someone to believe, ‘Oh, if a bunch of people, if there is word of mouth and there are rumors out there,’ then it is public,” he said.

Terence J. Lynam, a lawyer for Rajaratnam, argued that it was fair to use the “word of mouth” instruction. He added: “We think it is helpful to the jury to explain it that way.”

The trial was expected to feature dozens of secretly taped conversations between Rajaratnam and partners in the hedge fund industry. The Manhattan resident has remained free on $100 million bail since his arrest despite efforts by the government to have him held without bail before trial.

One of Rajaratnam’s lawyers, John Dowd, has said Rajaratnam only acted on information that was already public whenever he instigated trades.

Last week, Rajaratnam’s lawyers had complained that the government was trying to taint the jury pool by bringing civil charges against a friend of Rajaratnam’s. However, only one prospective juror was eliminated Tuesday after Holwell asked if any had heard about the case through the media.

The judge at first rejected the defense request to eliminate the juror, who responded to a question about whether it seemed Rajaratnam was guilty by saying: “It seemed a little that way.” But Holwell later changed his mind and excluded the prospective person from the panel.

(TM and Copyright 2011 CBS Radio Inc. and its relevant subsidiaries. CBS RADIO and EYE Logo TM and Copyright 2011 CBS Broadcasting Inc. Used under license. All Rights Reserved. This material may not be published, broadcast, rewritten, or redistributed. The Associated Press contributed to this report.)