After weeks, it is finally the defence’s turn to woo the jury in the insider trading trial of Raj Rajaratnam.
Yesterday, Galleon’s former head of research testified that Raj “reviewed dozens of analyst reports each week and was “amazingly educated” about stocks, research and investment strategies,” Bloomberg reported.
The defence aims to prove that Raj traded on stocks based on that excellent research, and not insider tips.
Richard Schutte, who was president at Galleon, as well as chief of research, said all of the hedge fund’s 35 analysts were expected to be experts in 15 or so companies each, and had to file detailed reports on those firms to Raj each week.
According to Bloomberg,
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, [Schutte] 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.”
Schutte testified that Galleon analysts and portfolio managers engaged in a “continuous process of information sharing” as part of its strategy of “arbitraging consensus,” or identifying where Wall Street’s consensus was wrong. Galleon had a “very disciplined, very methodical” process of analysing research, he said.
Shutte testified that he never once saw Raj demand inside information, as the government’s witnesses have alleged. Adam Smith, on the other hand, who was a former trader for Raj, says that his boss liked to combine good research with illegal insider tips — aka, having “two torpedoes in the water” — to make his trades.