Two main Galleon Defendents Request Separate Trials
Former New Castle Funds LLC trader Danielle Chiesi is looking pretty good these days, all things considered. (I can’t post the picture because I don’t own the rights or have that kind of money, but here’s the link). I mean, she is a co-defendant in what prosecutors are describing as the biggest hedge fund insider-trading case in U.S. history. But she’s looking pretty damn perky. Downright chipper, in fact, if the linked photo is any indication. And enviably thin (though that could just be the stress of facing up to 155 years in jail and tens of millions of dollars in fines, plus the possible forfeiture of the proceeds of the charged crimes.). But still! Perky! And blissfully (perhaps naively) hopeful– she’s been quoted as saying that she won’t see a single day in jail. But maybe now she has a prayer of that happening.
On Monday, lawyers for accused Galleon founder Raj Rajaratnam, 52, and his co-defendent Chiesi filed papers to request separate trials on the grounds that allegations of seven distinct conspiracies to commit securities fraud failed to show they could be connected at trial, according to Wall Street Journal article. “There is an utter lack of meaningful overlap between the seven alleged conspiracies in the case,” Rajaratnam’s lawyer, John Dowd, said in a memorandum to U.S. District Court Judge Richard Holwell. He goes on to say,
Each purported ‘scheme’ involves entirely different communications, participants, and acts, and will thus require the presentation of entirely different evidence and witnesses. The need for multiple limiting instructions and other judicial safeguards to ensure appropriate consideration of each defendant and each offense will also increase the time and resources required to conduct a fair joint trial.
In a Bloomberg article, Dowd went even further, suggesting, “The cumulative impact of evidence presented against Ms. Chiesi will improperly spill over to Mr. Rajaratnam, compromising Mr. Rajaratnam’s trial rights.”
Alan Kaufman, a lawyer for Chiesi, 44, made a similar argument for severance of trial. He was quoted in the WSJ as saying, that a joint trial of Chiesi and Rajaratnam,
would visit irremediable, prejudicial spillover upon Chiesi and deny her of her right to a fair trial.The complexity and disparity of the allegations in this case carry with them the danger that during the lengthy time period that would be necessary in connection with endeavoring to prove seven separate conspiracies, and the repeated limiting instructions required, jurors would become confused as to which evidence pertained to which conspiracy count, and, in turn, which defendant.
The criminal trial of Rajaratnam and Chiesi was scheduled to start on October 25. They were arrested on Oct 16, 2009 and pleaded not guilty two months later. Both are currently free on bail.
According to Reuters, as part of Rajaratnam’s lawyers’ defense strategy, they attacked the credibility of former trader and government cooperator Roomy Khan,in an effort to suppress wiretap evidence which was obtained, Rajaratam’s lawyers allege, “based almost entirely” upon the questionable testimony of Khan. Khan, who was previously convicted of insider-trading and who pleaded guilty in the Galleon case, allegedly recanted what she told FBI investigators in interviews regarding purchases of Hilton Hotels Corp stock.
As part of his defense, Rajaratam’s lawyers are arguing that Khan “preposterously claimed” she bought the Hilton stock before the company was bought by a private equity firm, because “Paris Hilton was incarcerated [for violating probation on driving offenses] so Khan thought this could be good publicity for the hotel,” according to Galleon’s lawyers. Because I know that’s how I choose which stock I invest in… I always look to see which celebrity du jour has been locked up and buy up everything I can…. right.
In later interviews, according to Reuters, Khan, a onetime employee of Intel Corp and Galleon, confessed that she obtained the tip on Hilton from a Moody’s Corp analyst Deep Shah, the memo said. Shah is also charged in the case, but has yet to be arrested.
Now Rajaratnam’s lawyers are saying that the government knew that Khan was “an inveterate fabricator” when it filed applications with the court between March and November 2008 to conduct wiretaps on the basis the information she had provided the government with and the evidence should be thrown out.
In a memo, quoted by Reuters, Rajartnam’s lawyers said,
Not only did the government fail to bring these facts to the court’s attention, it claimed in two of the affidavits in support of those applications that Khan has proven to be ‘reliable’.
Rajartnam and Chiesi are also facing trial for civil fraud charges brought by SEC along with about 20 other former traders, lawyers and executives stretching from Wall Street to the Silicon Valley. Prosecutors have alleged Rajaratnam made $45 million (some reports have estimates as high as $49 million) from illegal trading based on confidential tips and that Chiesi made $4 million.
So far, most of the evidence was gathered by prosecutors has been obtained using wiretaps and information from cooperators. Ten out of 21 people charged in connection with the Galleon case have pleaded guilty to fraud charges. Of those, eight have chosen to cooperate with the government.
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