Raj Rajaratnam in court for insider trading trial

Galleon hedge fund founder Raj Rajaratnam, the central figure in the biggest U.S. insider trading case in a generation, went to trial on Tuesday in a showdown with prosecutors that will feature wiretap evidence and the testimony of former friends and associates.

Onetime billionaire Rajaratnam, 53, was mobbed by photographers and TV crews when he stepped from a black suburban SUV and walked into Manhattan federal court. Dressed in a brown coat and a suit, he was escorted by one of his lawyers.

He sipped black coffee in the courthouse cafeteria, declining to comment to reporters. He then went to the courtroom where about 150 potential jurors were to be questioned by U.S. District Judge Richard Holwell.

Opening statements will start once the 12-member panel is in place for a trial expected to last up to two months.

Rajaratnam is the former head of Galleon Group, which once managed $7 billion. He could face a 20-year prison sentence if convicted on the most serious charge of securities fraud.



Since arresting Rajaratnam in October 2009 and announcing criminal charges against 26 former traders, executives and lawyers, the U.S. government has pressed ahead with what it calls the biggest probe of insider trading in the $1.9 trillion hedge fund industry.

Prosecutors allege Sri Lankan-born Rajaratnam made $45 million in illicit profits through tips from former friends and associates. Nineteen people have pleaded guilty in the case, which stands apart from past insider trading probes because of the government's wide-scale use of phone taps.

A questionnaire asks potential jurors more than 50 questions aimed at weeding out potential bias against the financial industry and concerns about the economic crisis.

The case "does not have anything to do with the recession or who is to blame for the financial problems we face," the questionnaire reads.

It goes on to ask, "Does the fact that the case involves the financial industry, Wall Street executives, hedge funds, mutual funds and the like, make it difficult for anyone to render a verdict?"

It is not known whether Rajaratnam will testify in his own defense after the jury has heard hours of tapes and testimony from as many as six cooperating witnesses. Prosecutors say they could present up to 173 recordings of telephone conversations.

Among those who could be called by the government to testify is Lloyd Blankfein, chief of Goldman Sachs Group Inc., according to published reports.

Prosecutors and regulators have accused former Goldman board member Rajat Gupta of leaking information about the bank to his friend Rajaratnam, but Gupta has not been criminally charged.

Rajaratnam's chief defense lawyer, John Dowd, has fought hard for his wealthy client, arguing that prosecutors have broadened the definition of insider trading. A money manager's liberty should not be at risk because he trades on a stock while knowing something about the company, Dowd argues.

He also fought, unsuccessfully, to suppress the FBI's secretly recorded phone conversations from trial.

The case is USA v Raj Rajaratnam et al, U.S. District Court for the Southern District of New York, No. 09-01184.