Defense Calls First Witness in Hedge Fund Boss Inside Trading Trial

Monday, April 11, 2011


The defense is set to call its first witness Monday in what the government calls the biggest hedge fund insider trading trial in U.S. history.

Last week, federal prosecutors rested their case against Galleon hedge fund founder Raj Rajaratnam, who's accused of trading stocks based on private information he collected from friends and making tens of millions of dollars in the process. 

The big question is whether Rajaratnam himself will take the stand. So far it's not clear, but defense attorneys said they expect to call at least five witnesses, including one whose testimony the government has tried to block — unsuccessfully.

The expert witness is Gregg Jarrell, professor of finance and economics at the Simon Business School at the University of Rochester. He worked under the Reagan Administration as chief economist of the U.S. Securities and Exchange Commission.

Jarrell is expected to testify that the information Rajaratnam allegedly used to make trades wasn't significant, and if the government can't show the information was important to other investors, it could lose its case.

Other likely witnesses include John Pernell, president and chief investment officer of Polaris Investment Partners; Robert Hotz, one of Rajaratnam's lawyers; and Rick Schutte and Stephen Granoff, former Galleon employees. 


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