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26 Jan 2010

SEC Wants Wiretap Evidence From Hedge Fund Founder Rajaratnam

HedgeCo News - The SEC asked a judge to order hedge fund founder Raj Rajaratnam to share wiretap recordings that his lawyers got from federal prosecutors, Bloomberg reports.

Because of legal hurdles in obtaining the 14,000 wiretap intercepts, the SEC is seeking it from Rajaratnam and his co-defendant, Danielle Chiesi, a New Castle Funds LLC executive.

“Defendants have the wiretap information; the commission does not,” SEC lawyer Valerie Szczepanik said in a letter filed in court, according to Bloomberg. “It would be highly inequitable and inconsistent with the federal rules to permit this case to be tried while defendants possess such an informational advantage.”

"The recordings were cherry picked and mismanaged and someone did not do their homework," Dowd told the Judge last week.

Rajaratnam's lawyer attacked the U.S. government's wiretap evidence saying he would file a motion to suppress the telephone recordings which were used to arrest Rajaratnam and more than a dozen other people in the Galleon raid. A hedge fund manager known as "Tipper X", and hedge fund consultant Roomy Khan are cooperating with investigators in providing evidence against Rajaratnam.

Federal prosecutors have doubled the sum of the allegations and former senior partner at McKinsey & Co., Anil Kumar, pleaded guilty to conspiracy, insider trading and securities fraud.

Rajaratnam was taken into custody in New York on Oct. 16, 2009 in what is being called the USA’s largest hedge fund insider-trading scheme.

The insider trading case involves the employees of some of America’s best-known companies, including International Business Machines Corp, McKinsey & Co and Intel Capital, an arm of Intel Corp, and Chiesi, an executive at New Castle Funds LLC was also indicted on multiple counts of conspiracy and securities fraud.

A civil lawsuit is scheduled for August 2, 2010. The prosecution has also indicted Rajaratnam on criminal charges.