Raj Rajaratnam's lawyer took a last shot at trial of keeping his client out of prison, blasting the credibility of key witnesses and telling jurors the government failed to prove the hedge fund manager broke insider trading laws.

In his closing argument on Thursday, chief defense lawyer John Dowd also fired back at the government contention Rajaratnam corrupted his friends and colleagues. He said it was the people who testified against the Galleon Group founder who were corrupt or had lied.

Mostly reading from a lectern, with an unemotional Rajaratnam sitting five feet behind him, Dowd presented dozens of e-mails, trading records and excerpts from trial testimony to show Rajaratnam made trades based on public reports, not on tips about nonpublic information.

The government can't make all the public information disappear, Dowd quietly told jurors in a full Manhattan federal courtroom. They can only hope you ignore it.

In a rebuttal, Assistant U.S. Attorney Jonathan Streeter told jurors Rajaratnam was an incredibly sophisticated investor who attended a top business school and knew his contacts should not have passed on company secrets.

Of course he knew they couldn't tell him, Streeter said. This is obvious stuff for someone at his level of sophistication.

Rajaratnam, 53, is the central figure in a sweeping government probe of insider trading at hedge funds.

Twenty of 26 people charged have pleaded guilty in the biggest Wall Street insider-trading prosecution since the 1980s. The 20th, a lawyer named Jason Goldfarb, pleaded guilty on Thursday to securities fraud and conspiracy in a separate case the government said is centered on Zvi Goffer, a former Galleon trader. Goffer has pleaded not guilty.

Dowd's deliberate delivery contrasted with Assistant U.S. Attorney Reed Brodsky's animated summation on Wednesday, when he reminded the jury of dozens of telephone wiretaps they heard.

Brodsky said these showed Rajaratnam committing his crimes time and time again in his own words and said the defendant got an unfair advantage over honest investors by corrupting his friends and his employees.

If found guilty of securities fraud and conspiracy, Rajaratnam could go to prison for up to 25 years.

To convict him, the government's evidence must convince jurors beyond a reasonable doubt that he received material nonpublic information from people who had a duty not to disclose it and that he knew it was wrong to trade on it.

The trial began on March 8. Streeter is expected to finish his rebuttal on Monday. U.S. District Judge Richard Holwell would then instruct the jury on the law and jurors would thereafter begin deliberations. There is no court session on Friday.


Dowd scoffed at government allegations Rajaratnam made millions of dollars trading on illegal tips about Goldman Sachs Group Inc from Rajat Gupta, a former worldwide managing director at consultant McKinsey & Co who sat on the bank's board until last year.

Prosecutors said Gupta tipped Rajaratnam in a hurried September 2008 phone call to a critical $5 billion investment in Goldman by Warren Buffett's Berkshire Hathaway Inc, and a month later told Rajaratnam Goldman was on its way to posting a surprise quarterly loss.

Dowd told jurors you don't know what was said in that September call and can't convict Raj based on assumptions.

He said that, when Rajaratnam bought Goldman stock, it had nothing to do with a call with Mr. Gupta.

Dowd also said one phone tap had Rajaratnam discussing the Goldman loss with a colleague and other factors playing into the bank's performance.

That's not evidence of insider trading, that is legitimate analysis of public information, the defense lawyer said.

Lawyers for Gupta were expected to face off against the U.S. Securities and Exchange Commission in the same courthouse later on Thursday. Gupta contends the regulator denied him a right to a jury trial after it filed civil charges against him. He has not been criminally charged.

Dowd told jurors not to trust three men who pleaded guilty to criminal charges and testified at the trial: former McKinsey partner Anil Kumar, former Intel Corp executive Rajiv Goel and former Galleon manager Adam Smith.

During cross-examination, Kumar acknowledged dodging taxes, while Smith changed his story, Dowd said.

He also said prosecutors were wrong about what Rajaratnam meant in telling friends and colleagues such as Danielle Chiesi to be radio silent. Chiesi also pleaded guilty and prosecutors said she provided inside tips to Rajaratnam.

This, Dowd said, was not a signal to keep illicit tips quiet, but a request not to reveal his trading activity.

Rajaratnam, like other big investors, did not want anyone to blab his position all over Wall Street, Dowd said.

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 and Jonathan Stempel; editing by Martha Graybow, Ted Kerr, Dave Zimmerman and Andre Grenon)