Today, accused hedge fund inside trader Raj Rajaratnam fired back at the SEC, accusing the government of illegally using wiretaps on him and slamming the use of a convict as an informant.
We asked litigation defence expert Mauricio Beugelmans of Cole-Frieman & Beugelmans LLP to weigh in.
TBI: What do you make of Rajaratnam’s charges about the improper use of the wiretaps and Roomy Khan’s prior conviction?
Beugelmans: The preliminary statement provides a general roadmap for the defence to the allegations: (1) Galleon’s/Rajaratnam’s trading strategies derived from Galleon’s own research and/or public information; (2) the wire taps must be excluded from evidence because the Government obtained the wire-tap warrants through a faulty ex parte application; and (3) government witness Roomy Khan is a convict.
Thus, I expect the most significant motion to revolve around the admissibility of the wiretaps.
TBI: Are you surprised they did not claim any 12(b) defenses seeking dismissal of the suit? What filing do you expect from them next?
Beugelmans: We must keep in mind that U.S. District Court Judge Jed S. Rakoff ruled in October 2009 that the SEC’s civil insider-trading case must move forward within five months, contrary to most civil and criminal actions that arise from the same set of facts. Under these circumstances, most judges permit the civil case to be stayed until the criminal case ends. [LR: The case is now set for trial for August 2.)
The ruling by Judge Rakoff should benefit Rajaratnam, as it will give his lawyers an opportunity to depose witnesses and conduct other discovery in the civil case prior to the criminal case. Thus, it was not altogether surprising that Rajaratnam’s lawyers did not initially file a 12(b) motion to attempt to dispose of or hamper the civil case because, on some level, it’s good for them to have access to the discovery tools in the civil case that are otherwise not available in the criminal case.
I would expect that Rajaratnam’s team will move aggressively towards deposing witnesses, including Roomy Khan.
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