Raj Rajaratnam verdict vindicates white-collar wiretaps

Wiretaps combined with witnesses make a solid case against Galleon CEO.

Of all the splashy stories of the Galleon Group insider trading case, the role of wiretaps has the most lingering significance for in-house counsel. Rarely used in white-collar cases, the wiretaps gave prosecutors a vivid picture of a sprawling network within the now-defunct, multibillion-dollar hedge fund that garnered inside tips to drive investment decisions. The question was: Would this hardball prosecutorial tactic stand up at trial?

The May conviction of Galleon Founder Raj Rajaratnam on all 14 counts against him seems to provide a resounding affirmative.

Powerful One-Two Punch

Insider trading defense often hinges on the complexity of the market itself, coupled with the notion that the defendant is smarter than most everyone else. Defenders argue that everyone has access to the same public information, but the defendant was able to outperform the market because of superior insight, intelligence or technology. Pile on a lot of financial-system esoterica and the average jury’s eyes will glaze over as the shadow of their doubt grows.

Caught in the Act

Considering that type of leverage, it’s only logical that prosecutors will soon bring wiretaps to bear in other complicated white-collar cases that lack smoking-gun documents, experts say.

Contributing Author

Steven Andersen

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