Will Judge Holwell Allow Ex-Galleon Trader Adam Smith To Be Questioned Over Rengan Rajaratnam's Dubious Document Removals?

After the jury went home last night, the Raj Rajaratnam trial continued in courtroom 17B.

Today Adam Smith, a former trader at Galleon who has already plead guilty, will take the stand. His testimony hasn’t even begun, and it’s already a battleground.

Here’s why:

On Sunday night, the prosecution and defence sent letters to the court, both motivated by the same desire: to limit the damage that Smith’s testimony and the evidence associated with him could do to their cases.

Last night,  Judge Holwell dismissed the jury and had each legal team stay behind to discuss the contested evidence.

On the government’s side, they want a transcript of a recording of Adam Smith and another Galleon trader, Ian Horowitz, redacted in parts to edit out Horowitz’s responses.

As for the defence, their bone of contention is that Smith may testify about Rengan Rajaratnam removing documents from the Galleon offices after Raj was arrested.  Smith told prosecutors — when he himself was charged — that after Raj was arrested in 2009, his brother appeared at the Galleon office and removed his older brother’s notebooks.

John Dowd and his crew argue that since Raj, “under arrest, had no control over his brother’s actions,” and more importantly, that the documents were taken for a reason (a lawyer apparently asked for them to prepare for a bail hearing), to have Smith testify about the event would suggest obstruction of justice, of which their client has not been accused, and confuse the jury.

“It would be impermissibly prejudicial, and of no probative value whatsoever, for the government to elicit testimony suggesting that Mr. Rajaratnam and his brother were concealing evidence,” Dowd said in his earlier letter to the court.

The government argued this evening that Smith’s testimony about Rengan’s actions should be admitted because it “proves the existence of the charged conspiracy and Rengan’s membership in it.”

Smith reportedly met up with Rengan twice in Spring last year. During an interview with the FBI, Smith alleged that during one of those meetings, Rengan asked about him about a “little black book of information.” He wanted to ensure Smith “was not going to say anything about the notebooks or black book,” according to Bloomberg.

The final issue involves Smith’s earlier FBI statement, in which he alleged that Rengan told him Raj had fabricated a story to cover-up his dealings with Morgan Stanley banker, Kamal Ahmed. This alleged conversation happened months after Raj was arrested.

Smith told investigators that Rengan had told him, “when someone discussed ‘Kamal’ with Raj, Raj would say it was a reference to Kamal Das, a sell- side analyst,” rather than Morgan Stanley banker and alleged tipster Kamal Ahmed, the government wrote in their letter.

Judge Holwell said last night he needed the night to think his decision over, but at least on the issue of Rengan’s removal of documents from Galleon, he said, “I’m leaning somewhat toward the defence position.”

The trial starts at 9:30 am and the judge asked the lawyers to arrive at 9 am, when he’ll make his verdict.

Here’s what happened earlier in the trial today >

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