Lawyers for Raj Rajaratnam, the billionaire co-founder of the Galleon Group facing charges of passing on insider tips to rake in millions of dollars, completed arguments in his defence yesterday. However, they did not call Rajaratnam to take the witness stand.
Though Rajaratnam's testimony was only hinted at by the defence, he remained silent throughout the case which is the biggest insider trading trial in a generation. Meanwhile, in the course of the arguments in his defense, a former Galleon president and a professor reviewed hundreds of documents in support of Rajaratnam.
According to the defence, the information that prosecutors had accused Rajaratnam of obtaining illegally was already out in the marketplace, and therefore not a secret. In support of their claim, the defense marshaled reams of news reports and media articles supporting the logic of Rajaratnam's trades in shares of companies like Intel, Google and eBay.
According to analysts, the final witness to take the stand was the most important. Gregg A Jarrell, a professor at the University of Rochester's business school was the mainstay of the defense's case. Shortly after Rajaratnam's arrest in October 2009, Jarrell and a litigation research firm operated by his former students, were assigned the work of digging through bank research and news reports.
Additionally, Jarrell analysed numbers in support of the assertion that the trades at the centre of the accusations constituted only a small fraction of the activity at the trade-heavy hedge fund. Jarrell conducted event studies, which are analyses of the impact of specific events like an earnings release or a merger, producing a significant effect on a given company.
The concept is that in case of an irrelevant event the information related to it is also irrelevant. As per the event studies by Jarrell, 10 of the 13 events under government scrutiny were statistically significant.