Yesterday in the trial of accused insider trader Raj Rajaratnam, the defence gave the beginning of its final argument.
A verdict could be reached today (although that’s very unlikely) or as early as next week.
And now that it’s getting down to judgment day, things are getting heated.
When the defence finished and the jury had left, the prosecution protested the change of the definition of insider trading. There’s a 4 part definition of committing an act insider trading that the jury will consider when determining the outcome of those parts of the prosecution’s case (the other parts are conspiracy to commit insider trading). It says that:
- That the insider or “tipper” giving Raj information had a relationship of trust and confidence with the company and was told that by revealing information, he would be breaching that trust.
- That the tipper knowingly breached that trust by disclosing material nonpublic information.
- That Raj knowingly received information from the person inside the company with that intimate knowledge. And that he knew the tipper violated that trust in disclosing it.
- That a trade was made on the inside information.
More details on the elements of the definition are available by clicking here.
Apparently the prosecution doesn’t want part of point #3 to be a part of the definition. They want that last sentence taken out. And apparently something was added to the definition (we’re not sure what) during the trial that expands on what “non-public” means. The prosecution also has some issue with that.
Judge Holwell ultimately decides what it will say.
The prosecution made the request to change the two parts of the definition after hearing the first half of defence’s closing argument (the second half takes place the following day, today).
The defence’s argument is that the information was out there, it was public, and –
“[To expect that] Raj should have dropped everything to see if it’s public – that’s ridiculous.”
“The government can’t prove it’s nonpublic, they haven’t even tried… if it’s public, if it’s out there, you must acquit.”
The defence needs the definition of nonpublic to be very specific because there’s a chance the jury could be convinced that the information was public thanks to the defence’s evidence: news articles, analyst reports, and word of mouth showing other people were talking about the trades Raj allegedly made illegally.
The Raj defence might be attempting to set a precedent for insider trading charges in the new age of media.
John Dowd told the jury, “In the government’s argument, the real world doesn’t exist. People talk, people talk to the media. The government would have you believe that the only way to find anything out is in a press release. That’s fiction. That’s not the real world. This is the media world, where it’s about distinguishing [between rumour and fact.]”