Rengan Rajaratnam, the brother of hedge fund billionaire Raj Rajaratnam, on Wednesday heard the opening salvo by prosecutors seeking to have him join his sibling in a federal prison for insider trading.
Federal Bureau of Investigation wiretaps will provide a "very revealing window into their corrupt relationship," Assistant US Attorney Christopher Frey told the jury that will determine Rengan Rajaratnam's fate in the next month in Manhattan federal court.
The brothers were among a group targeted in a US crackdown on insider trading at hedge funds. Since August 2009, prosecutors in the office of Manhattan US Attorney Preet Bharara have charged 86 people with insider trading, with 81 cases resulting in convictions, mostly through guilty pleas.
Raj Rajaratnam, 57, was convicted in 2011 of masterminding one of the biggest insider-trading schemes in a generation and is serving an 11-year sentence at the Federal Medical Center Devens in Massachusetts. The US Supreme Court on June 16 rejected Raj Rajaratnam's appeal of his conviction and sentence.
Rengan Rajaratnam, 43, who worked his way up through Steven Cohen's SAC Capital Advisors LP and Galleon Group LLC, the hedge fund co-founded by his brother, faces two counts of securities fraud and one count of conspiracy to commit insider trading, stemming from trades of Clearwire Corp and Advanced Micro Devices Inc (AMD) in 2008. Securities fraud carries a 20-year maximum prison sentence, while conspiracy carries a term of as long as five years.
World apart
Rengan Rajaratnam, the youngest of five children, was a world apart from Raj Rajaratnam, his oldest brother, Daniel Gitner, Rengan Rajaratnam's lawyer, told the jury in his opening statement.
"Raj and Rengan are very different in every aspect of this case," Gitner said. "Rengan didn't know what Raj knew. Rengan is flat out not guilty."
Before the start of Wednesday's trial, US District Judge Naomi Reice Buchwald ruled that prosecutors couldn't tell the jurors that Raj Rajaratnam was convicted.
"Just because his brother is guilty, it doesn't mean the defendant is guilty," she said.
Prosecutors won the judge's permission to play some of the more than 45 court-authorised wiretaps of telephone calls used to send Raj Rajaratnam to prison for 11 years, including conversations between the brothers.
FBI witness
Prosecutors called as the first witness Thomas Zukauskas, an FBI agent in New York who helped oversee those secret recordings.
The wiretaps are evidence of the "closeness" of the two brothers, as they shared illegal tips and committed insider trading, Frey said.
"Their own words will show you unmistakably and clearly their decision to commit insider trading," Frey said.
The prosecutor cited a call in which the two brothers discussed Rengan Rajaratnam's former classmate at Stanford Graduate School of Business. Frey said the conversation showed the younger brother was trying to corrupt his friend the way Raj Rajaratnam used his former business school classmates.
Frey said prosecutors will call cooperating witnesses, including Anil Kumar and Rajiv Goel, two of Raj Rajaratnam's former classmates from the Wharton School of the University of Pennsylvania, who had pleaded guilty and testified against him.
