It's been years since the SEC first discovered a cryptic text from Galleon founder Raj Rajaratnam that led to the largest criminal case of insider trading in a decade, and now the courtroom circus is finally getting under way. The trial, which starts today, has already courted its fair share of controversy. For one, Andrew Ross Sorkin thinks its pretty suspicious that no criminal charges have been brought against Rajat Gupta, the former Goldman Sachs board member accused of sharing insider information with Rajaratnam. Of the 26 Galleon-related cases the SEC has brought, all have wound up in federal court. But Gupta's charges, which came just days before the trial, will be heard in an administrative hearing, where he won't have the full discovery rights to hear the phone calls that allegedly incriminate him.
It's partially a function of the SEC's new powers under the Dodd-Frank bill that let the agency bring charges in this way. But considering Gupta's stature (he used to head McKinsey and has advised the Gates foundation), Kip Weissman, a former SEC enforcement lawyer, tells Sorkin, "This is very unusual. It’s a red flag.”
Then there's the matter of the judge, Richard J. Holwell, who sports a white mustache worthy of Sam Elliott. In the past, his quiet demeanor and tough stance on insider trading have been the bane of defense lawyers. Judge Howell has already coolly dismissed Rajaratnam's attorneys' claim that the SEC "gamed the system" to wiretap his client with a brusque "Thank you."
The Journal reports that Holwell "could provide a foil to the more combative style" of Rajaratnam's lead attorney, John Dowd. As Dowd continues his quest to pack the jury pool with people who think Wall Street bankers are sweethearts who just want to help people save up for retirement, jury selection might take longer than usual. But we're willing to wait however long it takes if it means seeing Lloyd Blankfein on the witness stand.