Galleon Insider Trading Case May Go To 2nd Circuit Appeal

How easy is it to appeal the admissibility of evidence gathered from wiretaps? The 2nd Circuit Court of Appeals might be addressing this question in the Galleon insider trading case say the attorneys for Galleon founder, Raj Rajaratnam.

According to Reuters, however, many legal pundits and experts are saying that Rajaratnam faces an uphill battle in bringing the issue before the 2nd Circuit. Rajaratnam was recently convicted on 14 courts of securities fraud and conspiracy by a federal jury. The case was the first Wall Street insider trading case where wiretaps had been used, according to Manhattan U.S. Attorney Preet Bharara.

Recorded telephone calls formed the building blocks of the evidence in the Rajaratnam case. Over the course of the seven week trial, numerous recordings were played for the court, attempting to establish that Rajaratnam was in violation of insider trading laws through conversations with corporate insiders and hedge fund colleagues.

In October, Rajaratnam's attorneys made a motion to suppress the evidence from the wiretaps. While the Court found error found in the FBI's applications for the wiretaps, the error was found harmless and the motion was denied by U.S. District Court Judge Richard Holwell.

Here are some quick thoughts on the possibility of appeal:

• Many issues were not preserved for appeal: Rajaratnam's attorneys didn't object to many of the procedural rulings, according to the Wall Street Journal. And without objections, defense attorneys may have failed to preserve those issues for appeal.
• Juror misconduct: While one juror was dismissed for medical reasons six days into the trial, appeal on the issue might be difficult as there has to be a very clear abuse of discretion for the decision to be reversed on this ground.
• The use of wiretap evidence for insider trading: At this stage, Rajaratnam's lawyers have indicated that they intend to pursue the wiretap issue. As wiretaps played an integral role in the conviction, a ruling against their admissibility could be the ticket to Rajaratnam's freedom.

With his sentencing hearing set for July 29, no appeal can be filed until then. Keep following this blog as the case plays out. With novel issues and billions of dollars at stake (not to mention a defendant with the financial means to fight this case to the end), this case will likely produce interesting arguments on both sides.

Related Resources

• Billionaire Raj Rajaratnam Guilty in Insider Trading Case (FindLaw's Decided)
• S.E.C. v Rajaratnam (FindLaw Cases)
• The Galleon Case is Nowhere Near Over (New York Times)
• Preventing Juror Misconduct (FindLaw)