By Grant McCool
NEW YORK (Reuters) - Now it is hedge fund manager Raj Rajaratnam's lawyers' turn to make their case at his insider trading trial on Monday that the government was wrong to accuse him of conspiracy and fraud.
The jurors have heard five weeks of prosecution evidence, including dozens of FBI phone taps and testimony of three cooperating witnesses that Rajaratnam cheated to gain an unfair advantage in the stock market between 2003 and March 2009, reaping an illicit $63.8 million.
Through cross-examination and hearings, the defense has previewed its "mosaic theory" of stock trading in Manhattan federal court -- the Galleon Group founder's trades were based on a collection of research, analysis and public information, not corporate secrets whispered to him by high-placed insiders.
"If the information is already out there, including in newspaper reports, it can't be found to be non-public," one defense lawyer, Terence Lynam, has argued before the judge.
The defense team has not disclosed whether one-time billionaire Rajaratnam, 53, will testify to tell his side of the story in the biggest Wall Street insider trading case in decades. If he did, it would be a rare instance of a high-profile defendant testifying and could open him to the possibility of a devastating cross-examination by prosecutors.
Rajaratnam's lawyers said they plan to call five witnesses in the next two days. They jury could hear closing summations from both sides later in the week.
The burden of proof is on the government's evidence to convince the jury that Rajaratnam received company secrets from someone who had a fiduciary duty not to disclose them and Rajaratnam knew it was wrong.
The Sri Lanka-born Rajaratnam, who faces up to 20 years in prison if convicted, has sat silently in court since his trial began on March 8, occasionally writing notes on a legal pad.
Defense lawyers said Polaris Investment Partners Inc hedge fund owner John Pernell and lawyer Robert Hotz will be called on Monday to contradict what government witness and former Galleon employee Adam Smith told jurors.
Smith pleaded guilty to securities fraud and conspiracy in January. Hotz is a partner at defense law firm Akin Gump Strauss Hauer & Feld LLP.
Other witnesses include former Galleon chief operating officer Rick Schutte and one-time Galleon analyst Stephen Granoff. Meanwhile, University of Rochester business professor Gregg Jarrell is expected to give expert testimony on trading.
Some litigation experts said they think the government had given the jury enough evidence to convict Rajaratnam, whose firm managed $7 billion at its peak.
Michael Diaz Jr, a partner at law firm Diaz Reus & Targ in Miami, said the defense has a difficult job.
"The issue for the jury will be the access to information and the timing ... not so much whether it was readily available to the public," Diaz said.
For example, the jury heard on a phone tap that Rajaratnam had advance knowledge from a Goldman Sachs Group Inc director that in October 2008, the Wall Street bank was on its way to its first quarterly loss as a public company.
"I just heard from somebody who's on the board of Goldman Sachs they are gonna lose $2 per share," Rajaratnam was heard telling David Lau, who ran Galleon's office in Singapore, on October 24, 2008. "So what he was telling me was that, uh, Goldman, the quarter's pretty bad."
Rajaratnam has been free on bail since his October 2009 arrest on charges related to trades in mostly tech companies such as search engine Google Inc chipmaker Advanced Micro Devices Inc and online auction site eBay Inc.
The case is USA v Raj Rajaratnam et al, U.S. District Court for the Southern District of New York, No. 09-01184.