Raj Rajaratnam’s Day In Court

Thursday afternoon marked a turning point in the Raj Rajaratnam trial. While jurors had already been played tapes of Raj complimenting Danielle Chiesi on how she “played” a tech exec into giving her material non-public information and one of him telling a friend he knew to buy shares of a company because “one of our guys is on the board,” been told that his brother felt the need to destroy his “private notebooks,” and heard testimony from a former McKinsey exec that Raj paid him $1 million for his tip about AMD’s acquisition of ATI, they’d yet to be shown evidence of the Galleon founder’s massive pair. Until yesterday. Read more »

Fifteen million of them. Read more »

If you’ve been keeping up with the Raj Rajaratnam insider trading trial, you may have come to the conclusion that things have not been going so hot for the Galleon founder. Though he is of course innocent until proven guilty, so far jurors have heard that Raj’s brother felt the need to destroy his big brother’s “private notebooks,” tapes of Raj telling Danielle Chiesi to keep their dealings on the down low, tapes of Raj telling a friend he knew to buy shares of a company because “one of our guys is on the board,” and testimony from former McKinsey exec that Raj paid him $1 million for his tip about AMD’s acquisition of ATI. Sure, Raj’s former head of research testified he never heard the boss asking for inside information and that the big man was “the most prepared of” any of the Galleon team simply by virtue of being “amazingly educated on the issues at hand” but the odds of getting off? Not so great. That’s why he needs a Hail Mary- one in which he’ll dazzle ‘em with fashion. Read more »

  • 13 Apr 2011 at 3:05 PM

Former Galleon Research Head Brings The Sass

Just before the lunch break on Wednesday, prosecutors began questioning Mr. Schutte as part of their cross examination, hitting him with a variety of rapid-fire questions about investor expectations for hedge funds and their managers. “They didn’t want hedge funds corrupting executives at companies, did they?” Assistant U.S. Attorney Reed Brodsky said. “I don’t know what investors want,” Mr. Schutte said. “I don’t think that’s a business plan I would put forth, if that’s what you’re asking.” [WSJ]

Holwell today said the defense may ask a witness — Geoffrey Canada, creator of the Harlem Children’s Zone, a New York City nonprofit group — whether Rajaratnam was “generous.” Prosecutors called that an improper question for someone called to testify about Rajaratnam’s good character. Holwell said that because prosecutors had called Rajaratnam “greedy” in their opening statement, Rajaratnam can respond with proof of his generosity. Canada may testify today or tomorrow. [Bloomberg]

Earlier today, Richard Schutte, former Galleon Group president and chief of research at the hedge fund, took the stand in the trial of his ex-boss, Raj Rajaratnam. The defense team led by attorney John Dowd attempted to use his testimony to contradict that of individuals called by the prosecution, which rested its case last week, arguing that Raj is guilty of insider trading. Today, via Schutte, we learned three reasons why Raj-Raj could potentially be innocent.**

Reason No. 1: Raj was just really well-versed in the companies Galleon covered.

Schutte said that the hedge fund employed 35 analysts at its peak in early 2008 and each was expected to be expert in as many as 15 companies. The analysts had to file weekly reports to Rajaratnam, he said. Every morning, Rajaratnam led a meeting of dozens of Galleon employees to review new “data points” — news accounts, regulatory filings and research — that might influence stock prices, he said. “He was the most prepared of any of us,” Schutte said of Rajaratnam today in Manhattan federal court. “He’s amazingly educated on the issues at hand.”

Reason No. 2: Schutte never saw Raj ask for material, non-public information in front of him.

“Did you ever see him ask for inside information?” defense attorney Michael Starr asked.

Reason No. 3 (and this is probably the most important): Raj had an extremely lucrative secondary source of income, rendering a need for ill-gotten gains unnecessary. Read more »

The Maestro

As we’ve previously discussed, Danielle Chiesi herself as admitted she was able to get a leg up on other insider traders by making sure to have both legs up in the air while in the company of some highly placed tech executives. Having said that, she knew that with others, like the guys not interested in opening their ‘hearts‘ to women besides their wives, a different tactic was necessary to get them to spill.

“They’re gonna guide down,” Chiesi told Raj Rajaratnam, according to a wiretap of their conversation on July 24, 2008, six days before Akamai made its public announcement. “I just got a call from my guy. I was talking about the family and everything and then he said, people think it’s gonna go to 25.”

“Honey, you know what, it’s just for us,” Chiesi continued, according to the tape. “We go slow, keep shorting every day.” “I played him like a finely tuned piano,” she added.

It’s one thing to deploy one’s “sexuality to build sources at male-dominated tech companies” but it’s quite another to know when to switch gears and ask questions about how their kids are doing, all the while waiting, knowing what’s coming. That Chiesi had such skills was not the only thing that stuck out to Raj, however. He was equally if not more so impressed with the high moral character she demonstrated while obtaining material non-public information. Read more »

The defense attempted to get Raj off on these particular conversations by arguing they had no relevance to the matter at hand. Read more »