Galleon hedge fund founder Raj Rajaratnam and co-defendant Danielle Chiesi asserted their innocence on Monday to charges of securities fraud, in what U.S. prosecutors describe as the biggest hedge fund insider trading case ever.
Wearing a crisp black suit and blue tie, Rajaratnam, 52, betrayed no emotion as he entered a plea of not guilty before U.S. District Judge Richard Holwell at the federal court in Manhattan. Chiesi, 44, who also entered a not guilty plea, smiled and embraced her mother following the proceeding.
My daughter is innocent and that's what you will be printing. She's my angel. God borrowed my body and gave me this girl, Gloria Chiesi told reporters later.
Lawyers for both defendants declined to comment after the hearing.
Assistant U.S. Attorney Joshua Klein said he expected the trial to last one month and recommended that it be scheduled to begin in June or July, since the corresponding U.S. Securities and Exchange Commission case is scheduled for August.
The judge said he was not prepared to set a firm trial date.
That might wind up to be the schedule, Judge Holwell said.
Later on Monday, the government reiterated its position that the criminal case should be scheduled ahead of the civil SEC case since potential witnesses would be less likely to testify openly at the SEC trial if the criminal case has not been resolved.
Prosecutors said investigators would turn over some 100 hours of wiretapped conversations to the defense.
Sri-Lankan-born Rajaratnam and Chiesi, a former employee of New Castle Funds LLC, are the only defendants to be formally indicted so far. Both have been out on bail since their October 16 arrest. A bail hearing for Rajaratnam is scheduled for January 8.
Twenty-one people have been criminally or civilly charged in the insider trading case involving employees of companies including International Business Machines Corp
Most of the accused had expertise in technology stocks. The allegations included passing inside information on earnings announcements, takeovers and contracts on 10 companies, generating more than $30 million in illegal profits, according to prosecutors.
Prosecutors contend that Rajaratnam was at the center of that illegal information network. Chiesi is accused of supplying tips to Rajaratnam and of trading on the information.
Prosecutors say that Rajaratnam and Chiesi made $20.8 million in illegal profits. The New York Times reported in October that Rajaratnam's Galleon lost millions of dollars on one trade detailed by prosecutors, on shares of Advanced Micro Devices. Profit is not a factor in a charge of illegal insider-trading.
Four others who were arrested and charged on the same October have not been indicted, but their lawyers are in talks with prosecutors.
They are Rajiv Goel, a former director at Intel Capital; Anil Kumar, former director of McKinsey, a global management consulting firm; Mark Kurland, former executive at New Castle hedge fund; and Robert Moffat, formerly senior vice president and an executive in IBM's systems and technology group.
Six traders or lawyers have pleaded guilty to criminal charges in the sprawling investigation.
In the overall case, inside trading allegedly took place in the shares of Google Inc
The cases are USA v Raj Rajaratnam et al, U.S. District Court for the Southern District of New York, No. 09-mj-2306 and USA v Danielle Chiesi et al No. 09-mj-2307.
(Reporting by Edith Honan; editing by Andre Grenon, Leslie Gevirtz)