September 29, 2010
The U.S. Court of Appeals for the Second Circuit ruled against the Securities and Exchange Commission (SEC), blocking its efforts to obtain from the defendants in the Galleon case the wiretap evidence that they received from the Department of Justice as discovery in the criminal case.
Raj Rajaratnam, the founder and manager of the Galleon Group and Danielle Chiesi, a former consultant to hedge fund firm New Castle Funds, have been accused of securities fraud in what prosecutors call the biggest hedge fund insider trading case in U.S. history. Both Mr. Rajaratnam and Ms. Chiesi deny any wrongdoing.
The appeals court overturned district court Judge Jed Rakoff's order requiring the defendants to disclose the wiretap evidence to the SEC. The court ruled that Judge Rakoff "clearly exceeded" his discretion in finding the SEC's right to the wiretaps "outweighed the privacy interests of the defendants" at this stage, while in the criminal case, federal Judge Richard J. Holwell still has yet to rule on the legality of the wiretaps and relevancy of the recordings.
The ruling was widely reported in the news including The New York Times, The Wall Street Journal, Bloomberg, Reuters and the New York Law Journal.
Kelley Drye partner Thomas B. Kinzler is representing Danielle Chiesi.