Just last week, on March 21, 2013, the Government unsealed an Indictment against Raj Rajaratnam’s younger brother, Rengan Rajaratnam, filed in the United States District Court for the Southern District of New York. He is being charged with one count of conspiracy to commit insider trading and six counts of securities fraud.
This prosecution is part of the same probe that led to the conviction of his brother and Rajat Gupta. We highlighted Raj Rajaratnam’s case and his appellate lawyer, Patricia Millett, last week. Currently, 77 individuals have been charged as a result of this probe and 71 of them have been convicted. Rengan also appears on the same wiretaps that were used in the prosecution of his brother and are the central issue in his appeal. The wiretaps are being challenged based on the fact that the application omitted critical details about an on-going SEC investigation in violation of the necessity standard. Rengan has not been arrested and the media reports suggest he is outside the United States.
I reviewed the Indictment and it appears that it was returned near the expiration of the Statute of Limitations, but my question is why unseal the Indictment, one day after filing it, when the defendant is still out of custody?
My concern is that it is intended to drive the point home to the appellate court what has been a theme championed by the Government in this case; that the “proof is in the pudding.” When you read the Government’s brief in the Rajaratnam appeal, there are multiple ways that they make the point that traditional investigative techniques into insider trading violations typically led to dead ends.
At the heart of the Government’s rebuttal against what are obvious errors and blatant omissions in the wiretap application is that these wiretaps led to an unprecedented number of insider trading prosecutions and convictions. This is a slippery slope and sets a dangerous tone to a dialogue that should remain focused only on the facts known at the time of the application. A wiretap is the ultimate intrusion because it allows the Government to eavesdrop on a citizen’s private conversations and it should always be an act of last resort.
With the announcement that there is yet another Indictment resulting from these wiretaps, the stakes are even higher for the Rajaratnam family… and more importantly, for every one of us. This ruling has the ability to open or close the floodgates of future relaxed wiretap applications in cases where they have never been used before. The notion that the ends justify the means is a dangerous argument that serves only to threaten our constitutional rights.