Last count survives in Rajaratnam brother's insider trading trial

Wed Jul 2, 2014 1:41pm EDT
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By Nate Raymond

NEW YORK (Reuters) - Prosecutors avoided the dismissal of the last remaining count against Rengan Rajaratnam on Wednesday, a day after a federal judge tossed the primary fraud charges against Galleon Group founder Raj Rajaratnam's younger brother.

Following arguments at a hearing in New York, U.S. District Judge Naomi Reice Buchwald declined to dismiss a count of conspiracy against Rengan Rajaratnam, allowing the case to proceed to the jury.

"I very much enjoyed hearing a preview of your summations, but I think I am going to have to hear them again," Buchwald said.

The ruling came after she dismissed two securities fraud counts against Rajaratnam, 43, related to the government's claims he engaged in insider trading in technology company Clearwire Corp in 2008.

The non-appealable decision meant Rajaratnam, a former Galleon portfolio manager, would avoid the most serious charges he faced, each of which carried a maximum term of 20 years in prison. The remaining conspiracy count carries up to five years in prison.

The ruling was a serious blow to prosecutors under Manhattan U.S. Attorney Preet Bharara, whose office has won 81 insider trading convictions of individuals through pleas or jury verdicts since October 2009, never losing at trial.

The ruling's impact could be seen throughout Wednesday's arguments, which drew the attendance of Bharara's top deputy, Richard Zabel.

A comment by assistant U.S. attorney Randall Jackson that the prosecution might still focus on how a tip about Clearwire to Raj Rajaratnam went to Rengan drew criticism from Buchwald.   Continued...

Rengan Rajaratnam (R) exits the U.S. District Court for the Southern District of New York in Lower Manhattan with his lawyers July 1, 2014. REUTERS/Brendan McDermid