Rajaratnam may have to disclose gains from fraud

A federal court jury will hear how much money accused insider trading mastermind and billionaire Raj Rajaratnam made and he won’t be allowed to question the government’s motives for prosecuting him, if the Justice Department has its way.

Rajaratnam, the co-founder of New York-based hedge fund Galleon Group LLC, faces trial next month in a Manhattan federal court over his alleged role in a nationwide insider trading scandal that has expanded to technology firms and Wall Street consultants.

After a series of guilty pleas and cooperation deals by alleged accomplices, the case is moving to a new stage where the two sides are trying to narrow or shape evidence that jurors will hear. Prosecutors are using tactics employed in cases against ex-Credit Suisse First Boston banker Frank Quattrone, media entrepreneur Martha Stewart and Bear Stearns Cos hedge fund manager Ralph Cioffi.

While Assistant US attorneys Reed Brodsky and Jonathan Streeter said in court papers that “evidence linking a defendant’s financial compensation to his possible motives for participating in an alleged fraud is relevant,” revealing significant wealth may also resonate in ways not as obvious. “The wealth of a defendant can cut both ways,” said Daniel Richman, a law professor at Columbia University in New York and a former federal prosecutor. It’s common for defence lawyers to argue “this person is so wealthy there is no reason for him to have cut corners on this particular matter,” Richman said.

Rajaratnam, who has denied wrongdoing, is accused of leading an insider-trading conspiracy that earned his fund about $45 million. Prosecutors said they will offer wiretaps of his phone conversations and testimony from his alleged accomplices, while Rajaratnam said there were innocent reasons for his stock trades. His spokesman, Jim McCarthy, declined to comment on January 27 on the government’s requests.

The Sri Lanka-born Rajaratnam is accused of making illegal trades dating back to 2003 and faces as long as 20 years in prison if convicted of the most serious charges. His trial is scheduled to begin on February 28 before US District Judge Richard Holwell.

More than 30 people have been charged in overlapping conspiracies tied to the case, and in recent weeks, two more pleaded guilty and agreed to cooperate.