Disgraced hedge fund founder Raj Rajaratnam's
conviction for insider trading in the biggest hedge fund insider-trading scheme in US history was upheld on Monday by a court, which rejected a challenge to the use of wiretaps in his high-profile trial.
The US Court of Appeals in Manhattan today confirmed the 2011 conviction of the co-founder of Galleon Group LLC for conspiracy and securities fraud.
The decision by a unanimous three-judge panel of the 2nd US Circuit Court of Appeals in New York was seen as a victory for federal prosecutors, who have used wiretaps to win convictions or guilty pleas for dozens of defendants in a wide-ranging investigation into insider trading that was unveiled in October 2009.
Rajaratnam, 56, a native of Sri Lanka was convicted of directing the biggest hedge fund insider-trading scheme in US history and is serving an 11-year prison sentence.
During the trial, the federal government introduced 45 secret recordings, along with documents and testimony derived from the wiretaps.
Rajarathnam's attorneys told in their appeal petition that the federal government should have exhausted other avenues of inquiry before resorting to electronic surveillance hid from a federal judge the existence of a related Securities and Exchange Commission investigation when seeking permission for a wiretap.
The prosecutors has alleged that Rajaratnam made $63.8 million in illicit profits from 2003 to March 2009 trading on stocks, including ATI Technologies Inc, which was bought by Advanced Micro Devices Inc; eBay Inc; Goldman Sachs Group Inc; Google Inc; and Intel Corp.
Challenging the use of wiretaps, Rajaratnam claimed an FBI agent improperly omitted information regarding the reliability of a cooperating witness when he sought a federal judge's approval for tapping into his calls in March 2008, and appealed trial judge Richard Holwell's decision to admit the wiretaps.
Writing for the 2nd Circuit, Judge Jose Cabranes said: "we cannot conclude that the government omitted certain information about the SEC investigation with 'reckless disregard for the truth.'"
He said disclosing the details would have actually strengthened the wiretap application. Cabranes also rejected Rajaratnam's argument that Holwell's jury instructions on the use of information were erroneous.