Legal News

Prosecutors Seek To Block Rajaratnam?s Expert Testimony

By Chad Bray

More drama in the Galleon Group insider-trading case:  federal prosecutors in Manhattan want to block a key defense expert from giving his analysis of Raj Rajaratnam’s trading.

Mr. Rajaratnam’s lawyers have argued that his trading and Galleon’s trades were based on a “mosaic” of research and publicly available information, not inside tips. He is currently on trial in federal court in Manhattan on 14 counts of conspiracy and securities fraud. He has denied wrongdoing.

As part of his defense, Mr. Rajaratnam’s lawyers want to call Gregg A. Jarrell, a finance professor at the University of Rochester’s graduate business school and a former chief economist for the U.S. Securities & Exchange Commission.

Jarrell is expected to testify that Mr. Rajaratnam’s trading was “economically inconsistent with the optimal exploitation of inside information,” Terence Lynam, one of Mr. Rajaratnam’s lawyers, said in a letter last month.

In a motion filed late Thursday, prosecutors asked that he be precluded from testifying. “Contrary to Professor Jarrell’s suggestion, the ‘mosaic theory’ is not a defense to insider trading; at best, it is an academic theory about what constitutes nonpublic, material information,” Assistant U.S. Attorney Jonathan Streeter said in a court filing.

The trial will enter its fifth week on Monday.

Full post as published by Law Blog - WSJ.com on April 01, 2011 (boomark / email).