Newspaper article International Herald Tribune

Insider Trading Appeal Centers on Wiretap ; Lawyers for Ex-Manager of Hedge Fund Say Request Violated U.S. Privacy Laws

Newspaper article International Herald Tribune

Insider Trading Appeal Centers on Wiretap ; Lawyers for Ex-Manager of Hedge Fund Say Request Violated U.S. Privacy Laws

Article excerpt

Lawyers for Raj Rajaratnam, who was sentenced to 11 years in prison for insider trading, contend that the government improperly obtained a wiretap in violation of U.S. laws on electronic surveillance.

In March 2008, the U.S. Justice Department made an extraordinary request: It asked a judge for permission to secretly record the phone conversations of Raj Rajaratnam, a billionaire hedge fund manager.

The request, which was granted, was the first time the government had asked for a wiretap to investigate insider trading. U.S. agents eavesdropped on Mr. Rajaratnam for nine months, leading to his indictment -- along with charges against 22 others -- and the biggest insider trading case in a generation.

On Thursday, lawyers for Mr. Rajaratnam, who is serving an 11- year prison term after being found guilty at trial, will ask a U.S. appeals court to reverse his conviction. They contend that the government improperly obtained a wiretap in violation of Mr. Rajaratnam's constitutional privacy rights and U.S. laws governing electronic surveillance.

Such a ruling is considered a long shot, but a reversal would have broad implications. Not only would it upend Mr. Rajaratnam's conviction; it would also affect the prosecution of Rajat K. Gupta, the former Goldman Sachs director who was convicted of leaking boardroom secrets to Mr. Rajaratnam. Mr. Gupta was scheduled to be sentenced Wednesday.

A decision curbing the use of wiretaps would also affect the government's ability to police Wall Street trading floors, as insider trading cases and other securities fraud cases are notoriously difficult to build without direct evidence like incriminating telephone conversations.

"Wiretaps traditionally have been used in narcotics and organized crime cases," said Harlan J. Protass, a criminal defense lawyer in New York who is not involved in the Rajaratnam case. "Their use today in insider trading investigations indicates that the government thinks there may be no bounds to the types of white- collar cases in which they can be used. …

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