NEW YORK (Reuters) - In a big victory for federal prosecutors, Galleon Group hedge fund founder Raj Rajaratnam lost his bid to suppress secretly recorded conversations from his pending criminal trial on insider-trading charges.
U.S. District Judge Richard Holwell on Wednesday ruled that the government could use wiretaps to investigate a fraudulent insider trading scheme, although the applicable federal law does not specifically authorize wiretaps to investigate insider trading alone.
The wiretap evidence is considered key to the government's efforts to convince a jury that Rajaratnam engaged in a massive insider-trading scheme.
Rajaratnam, 53, had asked the judge to suppress the evidence, arguing that investigators misled another judge into approving the FBI's wiretap application in March 2008.
He and co-defendant Danielle Chiesi, a former trader with New Castle Funds, have pleaded not guilty. Chiesi had also sought to suppress the wiretap evidence. Their trial is scheduled for January 17.
A spokesman for Rajaratnam did not immediately return a call seeking comment. Chiesi's lawyer, Alan Kaufman, declined immediate comment, saying he had yet to review the decision. A spokeswoman for U.S. Attorney Preet Bharara in Manhattan said that office does not discuss ongoing cases.
Federal prosecutors have described the case as the biggest U.S. hedge fund insider-trading case ever.
The government has estimated that the Sri-Lankan born Rajaratnam and Chiesi made about $53 million in illegal profits.
The case is U.S. v Rajaratnam et al, U.S. District Court, Southern District of New York, No. 09-01184.
(Reporting by Grant McCool and Jonathan Stempel; Additional reporting by Dena Aubin; Editing by Lisa Von Ahn and John Wallace)