US federal judge permits wiretaps in a Raj Rajaratnam scam case

This week the US District Judge Richard Holwell approved the use by prosecutors of wiretaps to investigate a fraudulent insider trading scheme supported by Galleon Group hedge fund founder Raj Rajaratnam. While the ruling does not specifically authorize wiretaps to investigate insider trading alone, it marks great victory for prosecutors who now can access secretly recorded conversations.

The judge rejected defense arguments that the wiretaps were poisoned because FBI agent B.J. Kang had misled a different judge who authorized them in March 2008 about their need, and were unnecessary because the U.S. Securities and Exchange Commission was pursuing its own civil fraud case without them.

While finding it "troubling" that prosecutors withheld details of the SEC probe, Holwell allowed the wiretaps of more than 2,000 conversations. He said that because much of the alleged scheme was conducted by phone, investigators were unlikely to fully uncover it by conventional means.