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| Raj and Rengan Rajaratnam |
Prosecutors filed a motion on Monday to allow the jury to hear about evidence that the brother of Galleon Group founder Raj Rajaratnam conspired in a cover-up. The brother, Rengan, apparently went into Raj’s office after his arrest on 16 October 2009 and removed several notebooks, according to former Galleon trader Adam Smith.
The notebooks contained handwritten notes, said Smith. Prosecutors posit that Smith’s testimony would prove Rengen’s participation in a conspiracy. Raj’s lawyer, John Dowd, disagreed:
"It would be impermissibly prejudicial, and of no probative value whatsoever, for the government to elicit testimony suggesting that Mr. Rajaratnam and his brother were concealing evidence," According to Dowd, the notebooks pertained to "Rajaratnam's charitable donations and real property holdings".
Several other narratives from Smith were outlined by prosecutors. Smith pleaded guilty in January to charges of insider trading. He supposedly will explain how Kamal Ahmed, a Morgan Stanley banker, passed him insider tips. The filing charges that Rengen solicited Smith to participate in the cover-up.
"Rengan told Smith that, when someone discussed 'Kamal' with Raj, Raj would say it was a reference to Kamal Das, a sell-side analyst (and not Kamal Ahmed, a Morgan Stanley investment banker whom the government intends to prove provided inside information to Smith, which Smith in turn provided to Raj).”
Smith admitted to attending a Galleon meeting shortly after Raj’s arrest, according to a FBI interview of Smith on 1 February:
"Raj was non-specific and very emotional, according to the individual. Raj told the employees that he was a fighter, that he was going to fight," and said that "the FBI agents had treated him horribly, would not let him use the bathroom and just kept him sitting there."
U.S. District Judge Richard Holwell appeared to be favoring not admitting mention of the notebooks into evidence. Neither Rajaratnam has been charged with obstruction of justice so far.
In another line of possible testimony, Smith could explain how Rajaratnam told Galleon trader David Lau that Raj could obtain early information on Goldman Sachs’ fourth quarter results. Rajaratnam is accused of learning this information from former Goldman director Rajat Gupta. Additionally, Smith said that Joseph Liu, a Galleon analyst, talked about the "thrill in having inside info edge."
Another tape involving Smith is being contested by both sides. On this tape, Smith tried unsuccessfully to incriminate a former Galleon trader, Ian Horowitz. Prosecutors are trying to suppress the wiretap unless Horowitz was called to testify.
© 2011 Hedge Fund Writer LLC
