Defense rests in NY trial of one-time billionaire

AP News
Posted: Apr 18, 2011 3:34 PM
Defense rests in NY trial of one-time billionaire

A one-time billionaire who is the lead defendant in the largest hedge fund insider trading case ever didn't take the stand to tell his side of the story, and closing arguments in his trial were set for Wednesday.

Defense attorney John Dowd announced Monday that he was finished calling witnesses after his week-long presentation on behalf of Raj Rajaratnam, a Sri Lankan-born hedge fund founder who became one of the most well-known names on Wall Street in the last decade.

Prosecutors called an FBI agent back to the witness stand and played another audio tape of a phone conversation, one of dozens played for the jury over the past seven weeks as they try to convince the panel that Rajaratnam made $68 million illegally.

Rajaratnam's lawyers called a number of witnesses to rebut the claims and support their argument that Rajaratnam traded only on information that was publicly available.

Among the witnesses was Geoffrey Canada, president of the Harlem Children's Zone and a New York education advocate featured in the documentary "Waiting for Superman." Canada, who signed Rajaratnam's $100 million bond to help secure his release after his October 2009 arrest, said Rajaratnam was "a dear friend of mine."

U.S. District Judge Richard J. Holwell scheduled closing arguments for Wednesday morning.

Rajaratnam founded the Galleon Group of hedge funds a decade ago, but the funds were closed after his arrest. He has pleaded not guilty to conspiracy and securities fraud charges.

Since his arrest, more than two dozen other traders and employees of public companies have been charged in a crackdown by federal authorities on insider trading. Already, 19 have pleaded guilty.

FBI Assistant Director Janice K. Fedarcyk last week said authorities began a major insider trading probe of the hedge fund industry three years ago, dubbing the investigation "Perfect Hedge."

During the trial, prosecutors presented taped conversations in which Rajaratnam can be heard talking with other hedge fund traders about the trades he made before his October 2009 arrest.

The final tape featured Danielle Chiesi, who said during a guilty plea earlier this year that she gave Rajaratnam inside information while she worked at New Castle, the equity hedge fund group of Bear Stearns Asset Management Inc.

At one point on the tape, she could be heard telling Rajaratnam, "I've got a big mouth."

Chiesi has not yet been sentenced. She faces a possible prison sentence of between three and four years in prison. Charges against her originally carried a potential prison sentence of up to 155 years.

Rajaratnam could face up to 185 years if he is convicted of the charges against him, though any penalty would likely be dramatically less.