From Hedge Fund Law Report: The use of wiretap evidence is
the most important innovation in insider trading enforcement in the last five
years, and nothing illustrates the evidentiary power of wiretap evidence as
starkly as the Rajaratnam trial and conviction.
As the hedge fund industry well knows, on May 11, 2011, after a
two-month trial, including 12 days of jury deliberations, Raj Rajaratnam,
founder of hedge fund manager Galleon Group, was found guilty of nine counts of
securities fraud and five conspiracy counts.
In October 2011, he was sentenced to 132 months in prison and ordered to
pay a $10 million fine and to forfeit $53.8 million. Prior to the Rajaratnam trial, most insider
trading cases were based on circumstantial evidence. But the case against Rajaratnam was based in large
part on direct evidence – recordings of over 2,200 of Rajaratnam’s telephone
conversations with more than 130 individuals.
As Rajaratnam’s defense team found, it is often difficult or impossible
to rebut the validity of wiretap evidence.
Given the comprehensiveness of many wiretaps, it is even difficult in
most cases to offer competing interpretations of the same wiretap. There is no substitute from the prosecutor’s
perspective – and little as damning – as a defendant explaining his bad acts in
his own words.
Read more at http://www.hflawreport.com/
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