Securities Law Prof Blog

Editor: Eric C. Chaffee
Univ. of Toledo College of Law

Sunday, April 17, 2011

Week 6: Rajaratnam's Defense

The defense in Raj Rajaratnam's criminal insider trading case began this week, and the testimony of two important witnesses took up most of the week.  Rick Schutte, former Galleon president for U.S. operations, testified at the beginning of the week.  His testimony was intended to show that RR's trading was based on discriplined, diligent analysis of publicly available information.  For example, he described a staff of analysts who met every morning, with RR the most prepared at the meetings.  The defense introduced numerous articles and research reports on the companies involved in the trading transactions to reinforce its point that the trades were made on publicly available information.  The government, on cross-examination, elicited testimony from Schutte that RR invested $25 million in Schutte's investment fund months before the trial started, making RR the biggest investor in Schutte's fund.

Gregg A. Jarrell, a business professor at University of Rochester and former SEC economist, was the defense's second key witness.  His testimony, at the end of the week, was intended to show that RR's trades were consistent with publicly available information.  He went through a detailed Power Point presentation highlighting the trades and linking them to publicly available information.  He also emphasized that Galleon lost $67 million on AMD trading.  On cross-examination, the government sought to show that Jarrell's selection of articles was "cherry-picking" and that there were numerous articles with contrary views.

Another defense witness was intended to show RR's generosity.  Geoffrey Canada, president of Harlem Children's Zone, testified about RR's support for his program.

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