NEW YORK — Former hedge fund titan Raj Rajaratnam was convicted in an insider-trading case Wednesday thanks largely to weapons prosecutors have using against mobsters and drug lords for years: wiretaps. What that means for his former peers depends on whether it's true, as his lead attorney asserts, that what he did "happens every day on Wall Street."
Federal prosecutors used nearly three dozen recordings at trial to back up their claim that Rajaratnam made a fortune by coaxing a crew of corporate tipsters into giving him an illegal edge on blockbuster trades in technology and other stocks. In a clear signal of the tapes' importance, the U.S. District Court jurors asked several times to rehear some of the recordings before convicting Rajaratnam of all 14 counts: five of conspiracy and nine of securities fraud.
Rajaratnam could be heard wheeling and dealing with corrupt executives and consultants — in one case demanding "radio silence" on information that could affect a stock price.
The tapes spelled the demise of a defendant who "was among the best and the brightest, one of the most educated, successful and privileged professionals in the country," U.S. Attorney Preet Bharara said in a statement. "Yet, like so many others, he let greed and corruption cause his undoing."
Authorities have said the recordings represent the most extensive use to date of wiretaps in a white-collar case. The defense had fought hard in pretrial hearings to keep the evidence out of the trial by arguing that the FBI obtained it with a faulty warrant.
Once a judge allowed the recordings in, prosecutors put them to maximum use by repeatedly playing them for jurors, who convicted Rajaratnam on their 12th day of deliberations.
Bharara's office "took wiretaps for a test drive, and I'd say it was a resounding success," said Stephen Miller, a former federal prosecutor in private practice in Philadelphia.
The tapes were "a gold mine," said Steven Scholes, an attorney in private practice in Chicago who formerly worked in the Securities and Exchange Commission Division of Enforcement. "There's an old saying that you can't cross-examine a tape," he said.
Kenneth Herzinger, another former attorney in the SEC enforcement division, predicted prosecutors will expand the use of wiretaps to other white-collar prosecutions.
"I view the use of wiretaps as a game changer and something that certainly the defense bar has taken notice of and I think that Wall Street has taken notice of," said Herzinger, now a San Francisco attorney in private practice.
Prosecutors had alleged that illegal tips allowed the 53-year-old Rajaratnam to make profits and avoid losses totaling more than $60 million. His Galleon Group funds, they said, became a multibillion-dollar success at the expense of ordinary stock investors who didn't have the advance notice he enjoyed of mergers, acquisitions and earnings reports.
On Wednesday, Rajaratnam sat at the defense table, a rarity for him at the trial, and stayed motionless as the verdict was read.
After the jurors were dismissed with a warning from U.S. District Judge Richard Holwell not to talk about deliberations, Assistant U.S. Attorney Jonathan Streeter asked Holwell to jail Rajaratnam. The defendant's overseas bank accounts and properties give him the means to flee, and the prospect of a lengthy prison term gives him a "tremendous incentive" to do so, Streeter said.
But the judge ruled that Rajaratnam could remain free on $100 million bail as long as he was placed under house arrest at his Manhattan home to await sentencing on July 29. Prosecutors said he faces a possible prison term of roughly 16 to 19 years under federal sentencing guidelines. Financial penalties including fines and restitution have yet to be determined.
- Victim of sexual abuse sues Boy Scouts of...
- Denver police shoot, kill teen who struck...
- Most K-12 students are now low income
- Survivors visit Auschwitz a day ahead of 70th...
- California bars judges from Boy Scouts...
- Private wells in California farm area show...
- Chess in schools: bringing the classic mind...
- Drone crashes at White House; hobbyist says...
- California bars judges from Boy Scouts... 90
- Kerry: Violent extremism is not Islamic 29
- Measles outbreak casts spotlight on... 20
- Victim of sexual abuse sues Boy Scouts... 16
- Idaho has 22 breeding wolf pairs, an... 12
- Some Republican presidential hopefuls... 12
- Religious response to postponed... 12
- 'Potentially historic' blizzard... 11