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Rajaratnam defence blitzes jury with data

NEW YORK (Reuters) - Raj Rajaratnam’s week-long defence at his insider trading trial amounted to a blizzard of numbers, graphs and documents.Some litigation experts said the “data dump” strategy was an effort to convince the jury that Rajaratnam, who was able to draw from a vast trove of analysis at the Galleon Group hedge fund, had no reason to cheat.But others said it fell short of countering more than 40 recorded phone conversations played to the jury and the trial testimony of two former Rajaratnam friends and a former employee who have pleaded guilty to criminal charges.Rajaratnam, 53, is accused of making $63.8 million between 2003 and March 2009 based on tips from highly placed corporate insiders, including a former director at Goldman Sachs Group Inc. Prosecutors described it as the biggest probe of insider trading at hedge funds on record.Before the trial in Manhattan federal court, Rajaratnam vowed to clear his name. When his multimillion-dollar defense team rested its case on Monday, he had opted not to take the stand in his own defense. It is relatively rare for defendants to testify.The defence called two witnesses - Galleon’s former chief operating officer, Rick Schutte, and a business school professor, Gregg Jarrell, to underpin Rajaratnam’s argument that his trades in mostly-tech stocks were guided by reams of company analysis and published reports.Jarrell, a professor at the University of Rochester Simon Business School, commented at length on each of the 14 transactions in the indictment. Jarrell said he ran statistical tests on the market and the company in question for each of the trades and found that any inside information on them was irrelevant.The professor talked the jury through hundreds of slides projected onto a screen in the courtroom, with graphs tracking stock prices and events that could influence share performance.The defense made the case that Rajaratnam was one of the most active and aggressive traders anywhere. Because he lost money on some trades, the defence said it did not make sense that he was cheating.“Who knows, it might resonate with the jury,” said Bennett Gershman, a professor at Pace University law school in New York who was not involved in the case.Jarrell, the defense witness, said on the stand that it was “mind boggling” that between 2005 and 2009 Rajaratnam himself traded in up to 602 different company stocks each year in 36,000 total trades valued at more than $172 billion.To convict Rajaratnam, the government’s evidence must convince the jury beyond a reasonable doubt that the hedge fund manager received material non-public information from people who had a fiduciary duty not to disclose it and that he knew it was wrong. If convicted, Rajaratnam faces up to 25 years in prison on charges of conspiracy and securities fraud.“I would be dumbfounded if the prosecution did not succeed,” said Ron Geffner of law firm Sadis & Goldberg LLC, who is not involved in the case. “It had a herd of people providing detailed testimony, including recorded voices, saying he violated the law.”In all, 19 out of 26 people charged in the broad Galleon case have pleaded guilty.In one of the few surprises of the lengthy trial, the prosecution raised the specter that Schutte, the defense witness, had a conflict of interest. He acknowledged under cross-examination that in the months before the trial, Rajaratnam and his family had invested $25 million in a $35 million fund that he manages.Some litigation experts described the moment at trial last Thursday as a stumble by the defense close to the finish line. If the defence was aware of this, they should have explained it up front. “You want the jury to hear it from you, not under cross-examination,” said Richard Scheff, chairman of Montgomery, McCracken, Walker & Rhoads, LLP in Philadelphia.Schutte’s lawyer, Alan Vickery, of Boies, Schiller & Flexner LLP, later said the government had resorted to “innuendo” to blunt his three days of testimony.Rajaratnam has attended court without any of his family through the six weeks of the trial so far. Among the few personal details about Rajaratnam that emerged during the defence case is that he contributed to an education programme in Harlem, New York, and liked to eat breakfast with his three children before going to his office.His team of nearly 10 lawyers from Akin Gump Strauss Hauer & Feld LLP will have their final chance to bolster their case at closing arguments, which start today.The jury will begin deliberating at the end of this week or the beginning of next week.