Rajaratnam jury restarts, asks for more phone taps

(Reuters) - The jury in Raj Rajaratnam’s insider trading trial started to consider the case anew after one panelist was excused for medical reasons and replaced, while the ailing hedge fund founder was absent from court.

Wednesday’s replacement of juror No. 2 by an alternate could change the dynamic and decision-making of a panel that had deliberated for six days.

U.S. District Judge Richard Holwell in New York ordered the reconstituted panel to start over. The jury did not reach a verdict on Wednesday, and will resume deliberations on Thursday.

Soon after the jury restarted, it asked to rehear recordings of 12 phone taps that are at the heart of the government’s case against Rajaratnam, founder of the Galleon Group hedge fund.

Jurors had begun weighing the evidence, including 46 secret recordings of Rajaratnam’s phones, on April 25.

“Most defense lawyers would say the jury being out for this long means the prosecution did not have an open-and-shut case,” said Matthew Herrington, partner at Steptoe & Johnson LLP in Washington, D.C., who is not involved in the case.

“If I were a defense lawyer in this case, given that this jury appeared to be struggling with a decision, I would be disappointed about any change in the dynamic of the jury room,” he said.

Over the past week and a half, the 12-member jury has mostly remained locked in deliberations, emerging three times to listen to recorded phone calls it wanted to rehear.

The calls that the jury asked to be replayed on Wednesday included one between Rajaratnam and former McKinsey & Co consultancy partner Anil Kumar on Friday, Oct. 3, 2008, in which Kumar tells his friend, “Ah Raj, eBay is gonna do massive layoff on Monday.”

Kumar had pleaded guilty in the sprawling Galleon case, and testified against Rajaratnam at the trial.

Lawyers for Rajaratnam argued that eBay Inc layoffs, which were announced on Monday, Oct. 6, 2008, had been widely anticipated, and that he did not trade on Kumar’s tip.

Rajaratnam, 53, was absent from the courtroom for a second day because of treatment on an infected foot. He had emergency surgery on Sunday and hoped to return to court this week, his lawyer John Dowd said. The jury did not deliberate on Tuesday.

Prosecutors have accused Rajaratnam of reaping as much as $63.8 million illegally between 2003 and March 2009 by trading on inside tips about such companies as chipmaker Advanced Micro Devices Inc and Wall Street bank Goldman Sachs Group Inc.

If convicted, he faces up to 25 years in prison.

The Sri Lankan-born money manager is the central figure in what the government calls the biggest probe of insider trading at hedge funds on record. He is the only person out of 26 charged to go on trial so far.

The dismissed juror had described herself during the jury selection process as an avid TV watcher who had also volunteered in the Israel Defense Forces.

The jury did not meet on Tuesday because of the juror’s medical condition. After saying in open court that the juror would not return, Holwell appointed an alternate, a man who works for the parks department in a New York suburb.

“The law requires that the jurors begin their deliberations anew,” Holwell told the panel. “This is because the law requires that a verdict be the product of the deliberations of all the jurors who reach a verdict.”

Holwell also told the jurors that Rajaratnam was absent “for personal reasons,” and that this should not enter into deliberations “one way or another.”

Rajaratnam faces 14 charges of securities fraud and conspiracy. The government tried to show beyond a reasonable doubt that Rajaratnam received company secrets from people who had a fiduciary duty not to disclose them and that he knew it was wrong.

The duration of the deliberations so far mirrors that of other high-profile white-collar crime cases of recent years.

A juror was replaced and a jury panel took 21 days over six weeks in 2005 to acquit former HealthSouth Corp chief Richard Scrushy of accounting fraud. He was later convicted in a separate case.

“As a practical matter, people won’t just wipe clean ideas that have been fixed over six days of deliberations,” said New York trial lawyer Gerald Shargel. “I have been involved in many trials where jurors had to be replaced. It doesn’t necessarily favor one side or the other.”

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