Wealthy American wants wiretap evidence tossed, saying feds cheated to eavesdrop on calls

Hedge fund chief fights wiretaps in insider case

NEW YORK — Lawyers for a wealthy hedge fund operator accused of making as much as $50 million through insider trades asked a judge Friday to conclude the government unconstitutionally secretly recorded over 2,400 conversations of their client and 130 others.

The court filing by Raj Rajaratnam’s attorneys was an attempt to eliminate a key part of evidence against the Galleon Group portfolio manager arrested last fall in a case prosecutors touted as a “wake-up call for Wall Street.”

Prosecutors say the case represents the first use of wiretaps in a hedge fund insider trading case. Wiretaps, which require court authorization, are commonly used in cases involving narcotics, organized crime or terrorism.

Lawyers for the Sri Lanka-born Rajaratnam, once described as one of the richest men in America, say the government never should have been allowed to ask that wiretaps be used against their client because Congress never authorized their use in insider trading cases.

They also say any evidence resulting from the wiretaps should be thrown out because the government obtained permission for them through a sworn FBI affidavit rife with “deliberately or recklessly false statements” and the omission of required information.

The lawyers said the government also misled the court when it said traditional investigative techniques would not work and failed to tell the court that Rajaratnam, 52, and his company had been under investigation since at least 2001.

They said Rajaratnam and Galleon had cooperated so fully in the probe that the government had 4 million pages of instant messages, e-mails, trade data and business records, along with dozens of hours of sworn testimony, which included a seven-hour deposition of Rajaratnam.

“In short, the government intercepted over 2,400 of Mr. Rajaratnam’s and at least 130 other individuals’ private telephone conversations to investigate a crime for which Congress specifically withheld wiretap authority, and it did so by ignoring its oath and obligation of candor to the court,” the lawyers wrote.

The lawyers said the penalty to the government should be the suppression of evidence of all conversations on Rajaratnam’s cell phone and all evidence that resulted from the conversations.

So far, 11 of 21 people charged in the case have pleaded guilty and some of them have agreed to cooperate and testify against Rajaratnam at his trial. Rajaratnam remains free on $100 million bail. Charges against him carry a potential penalty of up to 185 years in prison.

Yusill Scribner, a spokeswoman for prosecutors, declined to comment on the court filing. The government will be required to file its own arguments prior to a hearing scheduled for June 17.