* New York jury hears defense side of insider trading case
* Tense exchanges with key Rajaratnam defense witness
* Prosecutors bring charges in separate trading case
(Updates with more testimony by ex-Galleon executive and
Rajaratnam character witness)
By Grant McCool
NEW YORK, April 13 A prosecutor took a
combative tone with a key defense witness at Raj Rajaratnam's
insider trading trial on Wednesday, trying to poke holes in
arguments that the Galleon Group founder's trades were based on
research and published reports.
Under cross-examination in Manhattan federal court, Rick
Schutte, the former chief operating officer at Galleon, had a
few tense exchanges with prosecutor Reed Brodsky on the third
day of the defense side of the case.
Brodsky challenged Schutte over whether news articles and
analyst reports submitted by the defense as evidence that
Rajaratnam made his trading decisions based on a variety of
public information were ever read inside Galleon.
"Could you go back and verify that some of the news
articles that were shown to you were read at Galleon?" Brodsky
"No, I cannot do that," Schutte replied.
The government accuses Rajaratnam, once a billionaire hedge
fund manager, of making an illicit $63.8 million based on tips
from highly placed corporate insiders between 2003 and March
Through Schutte's testimony over the last three days, the
defense sought to underpin evidence it presented to the jury to
show that Rajaratnam did not break the law.
Galleon Group case graphic r.reuters.com/jyk48r
Rajaratnam ran tight ship at Galleon [ID:nN11290810]
Prosecution slowly beat same drum [ID:nN06254548]
Scrushy acquittal: Lessons for Rajaratnam [ID:nN24177653]
FBI agent tallies Rajaratnam trades [ID:nN05141368]
Q+A-The case against Rajaratnam [ID:nN0798137]
Sri Lankan-born Rajaratnam is the central figure in what
federal prosecutors have described as the biggest probe of
insider trading at hedge funds on record.
The jury previously heard five weeks of government
evidence, including FBI phone taps and former friends who
testified against the hedge fund founder.
Separately on Wednesday, the Manhattan U.S. Attorney's
Office and the U.S. Securities and Exchange Commission
announced charges in another insider trading probe, one
involving a former FrontPoint Partners LLC hedge fund manager
Questioning Schutte before the jury about one news article,
Brodsky, his voice rising, asked: "So possibly, perhaps, maybe,
it came from Reuters or Bloomberg or some other news source?"
The prosecutor said other articles cited by the defense
were printed out after Rajaratnam's arrest in October 2009 or
even weeks before the start of the trial on March 8.
Schutte responded that "these documents are usually
available online" and at another point "we didn't typically
store in hard copy form what everybody reads."
In between these tense exchanges, there was laughter in the
courtroom during seven minutes of testimony by American social
activist and educator Geoffrey Canada, called as a character
witness by Rajaratnam. He appeared in the award-winning 2010
documentary film "Waiting for 'Superman'" about public
Canada told the jury he had been present at his friend's
initial court appearance 18 months ago and co-signed his bail
but "perhaps I should explain, I didn't personally have the
$100 million of guarantee."
Canada said "Raj is a dear friend of mine" and is someone
who "cared about children."
Rajaratnam is charged with 14 counts of conspiracy and
securities fraud surrounding trades of Google Inc (GOOG.O),
Advanced Micro Devices Inc AMD.N, Intel Corp (INTC.O) and
other stocks. He faces up to 20 years in prison if convicted on
the most serious charge of securities fraud.
Brodsky peppered Schutte with questions about acceptable
practices at hedge funds.
Investors "didn't want hedge fund managers corrupting
executives at companies, do they?" he asked Schutte.
"I don't think that's a business plan that I would put
forth, if that's what you are asking," said Schutte, who joined
Galleon in June 2004 after years as a computer hardware and
storage analyst at Goldman Sachs Group Inc (GS.N).
The case is USA v Raj Rajaratnam et al, U.S. District Court
for the Southern District of New York, No. 09-01184.
(Reporting by Grant McCool; Editing by Dave Zimmerman, Steve
Orlofsky, Gary Hill)