Raj Rajaratnam and Danielle Chiesi officially plead not guilty yesterday to allegations relating to insider trading.
It was, of course, not surprising. Though the prosecutors asked for a few extentions before filing the grand jury’s official indictment last week, Rajaratnam maintained that he was not interested in reaching any plea agreement.
Now that the initial formalities are out of the way, we’ll soon get to the interesting part — what will be the defence of the defendants, especially the face of the case, multi-millionaire Galleon founder Raj Rajaratnam?
In his answer to the SEC complaint based on similar allegations, Rajaratnam provided a preview of what his criminal defence will be: 1) the information he traded on was either public or information obtained through proper channels and research; 2) government witness Roomy Khan is not reliable and 3) the government’s “unprecedented” wiretaps violated Rajaratnam’s constitutional rights, were obtained through a faulty affidavit, and must be thrown out.
The most watched of these three defenses will no doubt be the attack on the wiretaps.
The prosecution, and specifically the new U.S. Attorney for the Southern District, Preet Bharara, are touting their groundbreaking use of wiretaps in this case and their plan to invoke them more often. Which means whether or not they make them work in this high profile case will have an impact on future prosecutions.
Wiretaps are both a blessing and a curse for prosecutors. The evidence they provide can be wholly damaging — there is no better way to convince a jury of a person’s guilt than by playing in open court a recording of them saying exactly what they did. That’s the blessing.
The curse, however, is that surveillance evidence is extremely susceptible to attacks. Very specific steps have to be followed in order to properly obtain a wiretap warrant, and any flaw in the request means the evidence will not be admitted. One such requirement, as discussed here by Wayne State Law Professor Peter Henning, is that the government is required to provide the affidavit-granting court “a full and complete statement as to whether or not other investigative procedures have been tried and failed or why they reasonably appear to be unlikely to succeed if tried or to be too dangerous.”
Rajaratnam already hit on that in his SEC answer, and we can expect more of the same in the criminal complaint.
Based on the complaint, the wiretaps comprise a huge part of the state’s evidence — excerpts from taped conversation are the centrepiece of the complaint.
One interesting thing about the Rajaratnam complaint is how many ellipses, filled in [bracketed] words, and sentence fragments it contains. (“Akami…I’m trading it tomorrow…They’re gonna guide down,” the witness believed to be Roomy Khan is quoted as saying.)
The prosecutors could, of course, just be condensing where necessary. But some white collar crime experts consider it a bit unusual. Words left out will have nothing to do with whether the wiretap evidence is admissible, but it could have everything to do with how a jury interprets the conversations.
Complaints are for putting your best case forward. But a full presentation of the case will require a full presentation of the tapes.
That means the jury will hear the full conversations, even when it gets boring, and especially when the defence thinks there are different ways to interpret what the trading talk is all about.
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