Jury deliberates Rajaratnam's fate in insider case

NEW YORK (Reuters) - The fate of hedge fund manager Raj Rajaratnam went to the jury on Monday in Wall Street's biggest insider-trading trial in two decades, a case that featured FBI phone taps and former friends who testified against him.

Jury deliberations began just after midday on Monday in the Manhattan federal court trial.

Prosecutors accuse Rajaratnam, the founder of the Galleon Group hedge fund, of running a complex web of highly placed tipsters, including hedge fund colleagues and executives at public companies, between 2003 and March 2009. He made $63.8 million illegally, the prosecutors said.

The defense countered that Rajaratnam's trades were guided by analysis and public information.

Rajaratnam, 53, is charged with five counts of conspiracy and nine counts of securities fraud for trading on stocks such as chipmakers Advanced Micro Devices Inc and Intel Corp, Internet search company Google Inc and Wall Street bank Goldman Sachs Group Inc.

More than 40 tapes of wiretapped conversations were played for jurors in a trial that has lasted nearly seven weeks.

In his instructions to the jury, the last step before deliberations, U.S. District Judge Richard Holwell told jurors to consider the covert recordings in their deliberations, "whether you approve or disapprove" of them.

The jury has not been told that Rajaratnam fought unsuccessfully last year to suppress the wiretaps.

Holwell also reminded jurors that the government has the burden of proof. "The defendant is never required to prove that he is not guilty," Holwell said.

Jurors must be unanimous for a guilty verdict on any count. Rajaratnam stared mostly straight ahead as Holwell instructed the jury, lifting his chin up as the judge prepared to finish.

'HAS TO BE TRUE'

Rajaratnam's October 2009 arrest was part of an investigation that prosecutors have described as the biggest probe of insider trading at hedge funds on record.

The attention given to the case is reminiscent of the big insider-trading scandal of the mid-1980s involving speculator Ivan Boesky and junk bond financier Michael Milken.

To convict Rajaratnam, the government must convince jurors beyond a reasonable doubt that he received material nonpublic information from people who had a duty not to disclose it, and that he knew it was wrong.

If convicted, Rajaratnam could face up to 25 years in prison.

In the broad Galleon case, 20 out of 26 executives, traders and lawyers charged have pleaded guilty to criminal charges. Three testified against Rajaratnam.

Rajaratnam's trial began on March 8. He is the only defendant in the insider-trading probe to go to trial so far.

A separate trial of four other defendants is scheduled to start on May 16.

Earlier on Monday, with a frowning Rajaratnam looking on, a prosecutor finished his rebuttal to last week's defense summation by John Dowd, Rajaratnam's lead lawyer.

Referring to defense arguments that those who testified against Rajaratnam lied, Assistant U.S. Attorney Jonathan Streeter told jurors that there was so much corroborating evidence that the trial testimony "has to be true."

"People don't come in and admit elaborate crimes that they did not commit," Streeter said.

Defense lawyers have said Rajaratnam was a successful, aggressive money manager who used a wide array of research, analysis and public information to make his trading decisions.

In his closing statement last week, Dowd told jurors there were multiple instances where his client had taken a position in a stock before the recorded conversation.

"We have shown you other times when Raj didn't trade at all, and when he traded in the opposite direction of what was communicated on the calls," Dowd said.

The case is USA v Raj Rajaratnam et al, U.S. District Court for the Southern District of New York, No. 09-01184.

(Reporting by Grant McCool and Jonathan Stempel. Editing by Matthew Lewis and Robert MacMillan)