Today marks the beginning of a criminal trial two years in the making: after charges were brought against Raj Rajaratnam in 2009, today his lawyers and the government gave their opening remarks in the biggest insider trading case since the Ivan Boesky trial of the 1980s.
The government began proceedings, and after a quick recess, it was the defence’s turn to seduce the jury.
We’ve heard that Raj’s lead lawyer, John Dowd, is a bit of charmer, and he did get off to a pretty charming start.
“Good afternoon ladies and gentleman,” he said as he ambled over to the lectern placed in front of the jury box. The jury responded, in perfect unison, “Good afternoon,” like an elementary school class.
After lead government prosecutor, Jonathan Streeter, began his side’s argument with a pretty Hollywood-esque opener (“Greed and corruption — that’s what this case is about”) Dowd began his defence with a more low-key opener, declaring that it was now his turn to set the record straight. “Unlike Mr. Streeter, I’m going to tell you about the entire case.”
“We’re pleased and honored” to be representing Raj, Dowd began, explaining that contrary to the government’s representation, Raj was a man of “great loyalty,” who was, in fact, “generous to a fault.” Now, Dowd said, friends to whom Raj had extended that generosity were using it to “save their skins.” Those friends? A laundry list of cooperating witnesses that were once Raj’s friends-cum-business buddies, and will now testify to bring him down.
Dowd then outlined the defence’s argument: Raj Rajaratnam only ever traded stocks based on research and analysis that was garnered from data available from public sources. His success in predicting market movements and surging stock, had always been derived from “shoe-leather research, diligence and hard work.”
“You’ve heard the government state its case, but the evidence will show the government has it wrong,” Dowd said. “And the government has it wrong because it believed the word of unbelievable people. It focused on snippets of innocent conversations taken out of context.”
Great Research; Great Money Manager
While Streeter argued that Raj’s communication with company executives was law-breaking, Dowd told the jury his client was merely conducting deep, mosaic research about companies who’s stock he traded and followed for many years.
Raj’s relationships with company executives were not only normal, Dowd said, his investors expected that type of interaction: “Raj, like every investment professional on Wall Street was in the business of pursuing information,” he said.
The infomation about which Dowd is talking — earnings data; reports of impending mergers and acquistions — relates in this case to the stocks of a plethora of public companies, including Intel, AMD, Google, Hilton and Goldman Sachs. It wasn’t secret, you “just had to dig for it” Dowd said.
One example Dowd offered up involved trading of Goldman Sachs stock. The government argued that Galleon sold out of its position in the bank’s stock in 2008 based on a tip from former Goldman board member, Rajat Gupta, about poor quarterly earnings. Dowd said the decision was based on information from one of Raj’s “top guys in Singapore,” David Lau, about a hobbled Goldman investment in Chinese bank ICB, as well as layoffs at the firm.
Federal prosecutor Jonathan Streeter earlier told the jury that the government had a recording of Raj plainly telling a a co-worker he had heard from someone on the Goldman Sachs board that the bank was going to lose $2 a share but “The Street has them making $2.50.”
In another example, Dowd said that a big Galleon purchase of Goldman stock in 2008 was not because Raj had received a tip about Warren Buffett’s $5 billion investment in the firm, but rather because a source at a firm in Washington had told him TARP legislation was going to pass.
As expected, Dowd also went for the jugular on each and every government witness, telling jurors that each cooperating witness faced 25 years in prison, and was looking for a way out. Those individuals, including former McKinsey high-flier Anil Kumar and hedge fund analyst Danielle Chiesi, were “on a leash” — they have already plead guilty to fraud, and are awaiting their sentencing. Dowd suggested that how they testify against Raj would determine their sentence.
Dowd called Chiesi a liar looking for “a cheap claim to fame,” who exaggerated her import and what she knew to “impress others and insinuate herself.” He called others like former Galleon employee, Roomy Khan, fraudsters who were “playing the government like a violin,” to avoid jail time.
Dowd admitted that the jury will hear unpleasant, sometimes offensive phone calls between Raj and his brothers, but that just because these calls might sounds worse than “talk in an NFL locker room,” that does not constitute insider trading. “Think of your own conversations,” Dowd said to his audience.
He concluded with a series of reminders to the jury: question every phone call or recording the government presents as evidence; question the context; question the motives of the witness.
“Ask yourself, was the information already public?” he said. “If the information was public, there is no case here. It’s over.”