By Chad Bray Of DOW JONES NEWSWIRES
NEW YORK -(Dow Jones)- Galleon Group founder Raj Rajaratnam asked a federal judge on Friday to exclude new allegations by prosecutors of improper trading involving more than 20 companies not previously disclosed in his criminal insider-trading case.
In court papers Friday, John M. Dowd, a lawyer for Rajaratnam, asked U.S. District Judge Richard Holwell in Manhattan to exclude the new allegations, calling it "an unfair and prejudicial attempt to ambush Mr. Rajaratnam."
"These new allegations effectively triple the size of this case some six months after its inception and just two months after the government represented to the court that the parties could be ready for trial in June," Dowd said.
Rajaratnam and Danielle Chiesi, a former consultant for hedge-fund firm New Castle Funds LLC, are set to go to trial in October on charges of conspiracy and securities fraud. Rajaratnam and Chiesi, who were originally arrested in October 2009, have denied wrongdoing.
A spokeswoman for the U.S. Attorney's office in Manhattan declined comment.
In letters on March 22 and April 14, prosecutors from the U.S. Attorney's office in Manhattan disclosed they believe Rajaratnam and other co-conspirators shared material nonpublic information or made improper trades in the securities of Goldman Sachs Group (GS), AT&T Inc. (T), Cisco Systems Inc. (CSCO) and 19 other companies that had not been named publicly.
The companies were referred to as "other companies" in an indictment returned against Rajaratnam in February and had not been previously disclosed. The government letters were made public in court filings by Rajaratnam's lawyers.
The trades relate to two alleged insider-trading conspiracies involving Rajaratnam. One relates to Ali Far, founder of California hedge fund Spherix Capital LLC, and the other relates to Rajiv Goel, a former manager in Intel Corp.'s (INTC) treasury department.
Far pleaded guilty to conspiracy and securities fraud in October, while Goel pleaded guilty to conspiracy and securities fraud in February. Both are cooperating with prosecutors.
The Far and Goel conspiracies are among seven insider-trading conspiracies alleged in the latest indictment against Rajaratnam and Chiesi.
In total, 21 people have been charged criminally in the insider-trading probe and 11 have pleaded guilty to criminal charges.
On Friday, the Wall Street Journal, citing people close to the matter, reported that Rajat Gupta notified Goldman Sachs in March that he wouldn't stand for reelection as a director after prosecutors told him they were reviewing recorded telephone calls between him and Rajaratnam.
Through a spokesman, Gupta told the Journal his decision to step down was due to "other commitments." He had been a Goldman director since 2006.
In his motion Friday, Dowd said Rajaratnam will have "insufficient time" to prepare to defend himself at trial if the new allegations are allowed and that prosecutors have improperly tried to amend the indictment against him.
"The government's inexplicable delay in disclosing these allegations has left Mr. Rajaratnam with insufficient time to prepare for trial, and creates a severe risk that Mr. Rajaratnam will be convicted of charges at variance with those actually returned by the grand jury," Dowd said.
-By Chad Bray, Dow Jones Newswires; 212-227-2017; email@example.com
(END) Dow Jones Newswires
April 16, 2010 17:55 ET (21:55 GMT)
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