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Wiretaps Helped Get Hedge Fund Manager Convicted


It's MORNING EDITION from NPR News. Good morning. I'm Steve Inskeep.


NPR's Tamara Keith explains.

TAMARA KEITH: Raj Rajaratnam had connections with insiders at Intel and Goldman Sachs among others. And jurors found he used those connections to get material non-public information. He then used that information to make stock trades that brought in more than $60 million in gains. The jury found Rajaratnam guilty on all counts.

TONY BARKOW: This is a huge win for the government.

KEITH: Tony Barkow heads the Center on the Administration of Criminal Law at NYU, and he's a former prosecutor. He says in the past insider trading cases were hard to make.

BARKOW: It's hard to prove exactly what kind of information someone had when they traded unless you can somehow basically get inside their brain and show why they traded.

KEITH: But in this case, the government had the next best thing.


KEITH: Wiretaps.


KEITH: In this call, Rajaratnam is relaying to an associate a tip he got from a Goldman Sachs board member about the company's performance.


RAJ RAJARATNAM: Unidentified Man #1: Really?


KEITH: In another call, presented at trial, Rajaratnam tells colleagues about information he's gotten on the chip maker Spansion.


RAJARATNAM: One thing we know, this is very confidential, is that somebody is going to put a term sheet for Spansion.

KEITH: He then lays out a plan to set up an email trail to cover their tracks.


RAJARATNAM: Unidentified Man #2: Right.

RAJARATNAM: Unidentified Man #2: Have a corporate record.

KEITH: NYU's Tony Barkow says this evidence, in combination with testimony from cooperating witnesses, made for a very powerful case.

BARKOW: Rajaratnam was caught on tape saying things like, to the effect of, you know, we have our guy, we have our information that no one else has. And that's basically the essence of insider trading. And so in some ways he was caught red-handed.

KEITH: Rajaratnam's attorney says he'll appeal the verdict. Robert Heim, a defense attorney who's working on similar insider trading cases, says it's likely to come down to the wiretaps.

ROBERT HEIM: There's a very strict statute that governs the use of wiretaps. There's some question about whether or not wiretaps are permissible to be used as evidence against a person charged with insider trading and securities fraud. That's going to be the most likely avenue for appeal.

KEITH: Jay Brown is a law professor at the University of Denver.

JAY BROWN: It has now become clear enough that you can use wiretaps in insider trading cases, and so they will become common now, I think.

KEITH: And he says those who would break the law are going to learn a lesson from Rajaratnam.

BROWN: I think what this case will do is it will get insider traders off the phone, or at least off a phone that can be wiretapped.

KEITH: Tamara Keith, NPR News. Transcript provided by NPR, Copyright NPR.

Tamara Keith has been a White House correspondent for NPR since 2014 and co-hosts the NPR Politics Podcast, the top political news podcast in America. Keith has chronicled the Trump administration from day one, putting this unorthodox presidency in context for NPR listeners, from early morning tweets to executive orders and investigations. She covered the final two years of the Obama presidency, and during the 2016 presidential campaign she was assigned to cover Hillary Clinton. In 2018, Keith was elected to serve on the board of the White House Correspondents' Association.