Rajaratnam trial starts, judge questions jury pool

Reuters News
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Posted: Mar 22, 2011 10:50 AM
Rajaratnam trial starts, judge questions jury pool

By Grant McCool and Basil Katz

NEW YORK (Reuters) - The criminal trial of hedge fund founder Raj Rajaratnam, at the center of the biggest U.S. insider trading probe in decades, began on Tuesday with the judge asking potential jurors whether they could be fair in deciding the case of a wealthy financial executive.

About 150 potential jurors were told by Manhattan federal court Judge Richard Holwell that Lloyd Blankfein and David Viniar -- the Goldman Sachs Group Inc chief executive and chief financial officer -- were on a list of people who might testify or be mentioned during the trial.

Onetime billionaire Rajaratnam, 53, whose Galleon Group hedge funds managed $7 billion at their peak, is in a courtroom showdown with prosecutors that will feature wiretap evidence and the testimony of former friends and associates, some of whom once had top positions in corporate America.

Goldman's shares are among 35 stocks cited in the charges. Rajaratnam is accused of obtaining inside information about the bank from a friend who sat on the company's board. Goldman is not accused of wrongdoing.

The jurors sat for hours in a large courtroom listening to questions such as whether they had read news articles about the case, knew anyone involved in it, purchased stock in certain companies or ever been questioned by law enforcement officers.

On a law enforcement question, one man, Wayne Gillman, was excused after he told the court he was a longtime supporter of civil rights activist Rev. Al Sharpton, whose encounters with police at various protests have been well publicized.

Several others were also excused as the pool of 150 is winnowed down to 18 people -- 12 jurors and six alternates.

Opening statements will start once the 12-member jury is in place, likely Wednesday or Thursday. The trial is expected to last up to two months.

"We're gonna hear a lot of evidence with a lot of big dollars attached to it," the judge said, asking potential jurors whether they can be fair and impartial.

The list of potential witnesses or people who could be mentioned includes the names of 102 people and 50 companies. Many of the companies' shares are technology stocks that prosecutors accuse Rajaratnam of either illegally gathering information about or trading in between 2003 and March 2009.

The government says Rajaratnam made $45 million in illegal profit. He could face a 20-year prison sentence if convicted on the most serious charge of securities fraud.

Rajaratnam was mobbed by photographers and TV crews when he walked into the courthouse on Tuesday morning. Dressed in a brown coat and a suit, he declined to comment.

In the courtroom, Rajaratnam sat at the third table back from his team of seven lawyers. He stared straight ahead during jury selection, displaying no reaction.

Jurors were asked to raise their hands if the answer was "yes" as the judge read the questions. By late afternoon, they were just over halfway through more than 50 questions.

Judge Holwell called the selection process "tedious" but "important." It was frequently slowed down as he and the lawyers questioned potential jurors in private at the bench.

Chief defense lawyer John Dowd argues that prosecutors have broadened the definition of insider trading. A money manager's liberty should not be at risk because he trades on a stock while knowing something about the company, Dowd argues.

Since arresting Rajaratnam in October 2009 and announcing criminal charges against 26 former traders, executives and lawyers, the U.S. government has pressed ahead with what it calls the biggest probe of insider trading in the $1.9 trillion hedge fund industry.

Nineteen people have pleaded guilty in the Galleon case. It stands apart from past insider trading investigations because of the government's wide-scale use of phone taps.

The case is USA v Raj Rajaratnam et al, U.S. District Court for the Southern District of New York, No. 09-01184.

(Reporting by Grant McCool, Additional reporting by Basil Katz; editing by Dave Zimmerman, Gary Hill)