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Defense Blasts Insider Trading Witness in Call for Altered Bond
Lawyers for accused insider trader seek to reduce client's $100 million bond to $25 million
New York Law Journal
October 30, 2009
The lawyers for accused insider trader Raj Rajaratnam, the head of the Galleon Group hedge fund, launched their first attack on the government's case Thursday, claiming the chief witness in the $25 million insider trading prosecution was a liar who could not be trusted.
John M. Dowd and his legal team at Akin Gump Strauss Hauer & Feld said that cooperating witness Roomy Khan was a convicted felon who was "adjudicated by a court in August 2009 to have fabricated evidence in a court proceeding."
Dowd cited news reports in support of that statement, which was made in a letter urging Southern District Magistrate Judge Frank Maas to reduce his client's bond to $25 million from $100 million.
"None of those facts were disclosed to the Court in the government's criminal complaints, facts which certainly would have called into question the strength of the government's case," Dowd said.
Several media outlets have reported that court documents in U.S. District Court in San Jose, Calif., show that Khan has sent inside information to the hedge fund for more than 10 years.
Khan pleaded guilty to one count of wire fraud in the Northern District of California in 2001 in connection with feeding information from her employer, Intel, to an unnamed person at Galleon. She was sentenced to six months of home detention in 2002.
The fabrication of evidence occurred in a suit brought against Khan and her husband by a housekeeper who claimed the couple underpaid her.
Rajaratnam, 52, was arrested on Oct. 16 and made his initial appearance on four counts of conspiracy to commit securities fraud and nine counts of securities fraud.
He was charged along with Anil Kumar, 51, a director at McKinsey & Co.; Robert Moffat, 53, an IBM executive; Mark Kurland, 60,who is on leave as a senior managing director and general partner at New Castle Funds; Danielle Chiesi, 43, a terminated New Castle consultant; and Rajiv Goel, 51, director of strategic investments at Intel Capital.
Goel, who was arrested in California, made his initial appearance in the Southern District of New York on Thursday on charges of conspiracy to commit securities fraud and two counts of securities fraud. He was released on $750,000 bond secured by $100,000 in cash.
Goel is represented by David M. Zornow of Skadden, Arps, Slate, Meagher & Flom.
Prosecutors Joshua I. Klein and Jonathan R. Streeter are handling what is considered the largest insider trading case ever involving a hedge fund.
Also working with Dowd are Robert H. Hotz Jr., Samidh Guha and James E. Sherry of Akin Gump.
Dowd's letter said Rajaratnam and his attorneys also have worked to ensure that documents are preserved. He claimed his client ordered all shredders removed from Galleon following his arrest and "is confident that those documents and others will acquit him of charges of insider trading and restore the company's reputation."
The letter to Magistrate Judge Maas requests a modification in the conditions of Rajaratnam's pretrial release, saying he is not a flight risk and should be allowed to travel within the continental United States.
Rajaratnam secured the $100 million bond with $2.5 million cash, $17.5 million in personal property and the signatures of five co-signers. He was also ordered to stay within 110 miles of New York City.
In making their request, the Akin Gump lawyers compared their client's case to that of Bernard L. Madoff.
"For example, Bernard Madoff -- who had already confessed to defrauding investors of more than $18 billion, and who faced charges that could, and did, result in the equivalent of a life sentence -- was released on a $10 million secured bond," they wrote the judge.
"In contrast to Mr. Madoff, Mr. Rajaratnam is accused of insider trading that resulted in alleged gains of $16,829 and faces charges that could result, even by the government's own reckoning, in no more than a 10-year sentence," the letter said.
They noted Magistrate Judge Douglas F. Eaton, who was on the bench for Rajaratnam's initial appearance, said that, if everything is going well, "it would be logical to return a bit of the money."
The lawyers also sought to reassure the court of both Rajaratnum's close ties to the community and insisted on his innocence.
"Far from intending to flee, Mr. Rajaratnam looks forward to defending himself and correcting the mistaken and unwarranted allegations against him," they said.
The lawyers also insisted, "This case is at its earliest stages, and the government does not yet have the critical information that will place its current allegations in the proper context and dispel any allegation of criminal conduct."
The Akin Gump team took over Rajaratnam's defense this week from James Walden of Gibson Dunn & Crutcher.
