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 asked.
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 2009.
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.
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 education.
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, Advanced Micro Devices Inc, Intel Corp 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.
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)