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Rajaratnam legal team says DOJ, SEC probe leaks

Date: Wednesday, May 26, 2010
Author: Reuters

Federal investigators are examining possible improper leaks about the federal insider trading case against Raj Rajaratnam, the legal team for the Galleon Group founder said on Tuesday.

The U.S. Department of Justice's Office of Professional Responsibility has opened an inquiry into allegations of misconduct by individuals in the U.S. Attorney's office and the FBI, a May 11 letter to Rajaratnam's lawyer John Dowd shows. The letter appears on a website for Rajaratnam's defense team, www.rajdefense.org.

David Kotz, inspector general for the U.S. Securities and Exchange Commission, separately phoned Dowd this month to advise he would look into the matter, the defense team said.

The Justice Department, the office of U.S. Attorney Preet Bharara in New York, the SEC and Kotz declined to comment. A spokeswoman for The Wall Street Journal, which the defense said published several articles with improperly leaked material, said: "We stand by the fairness and accuracy of our reporting."

A former billionaire, Rajaratnam is the central figure in a sprawling hedge fund insider trading case in which 21 traders, executives and lawyers have been charged in connection with the alleged illegal trading of dozens of stocks. Eleven have pleaded guilty to criminal charges.

In an April 20 letter to U.S. officials, Dowd criticized the government's discussions of allegations in press releases and press conferences, and leaks including the contents of potentially unconstitutional wiretaps and the identities of unindicted alleged co-conspirators. These disclosures have compromised Rajaratnam's right to a fair trial, he said.

In addition to the Wall Street Journal, other news organizations including Reuters and Bloomberg were mentioned in the letter. Reuters is a division of Thomson Reuters Corp (TRI.TO) (TRI.N).

A spokeswoman for Reuters said, "Reuters stands by its reporting."

A spokeswoman for Bloomberg LP had no immediate comment. Bloomberg competes with Reuters in providing news and financial data.

The April 20 letter also appears on the website for Rajaratnam's defense team.

Dowd added that since Rajaratnam's arrest on Oct. 16, 2009, more than 3,000 articles have been printed about the case.

"The result is precisely the kind of 'trial by newspaper' that the Supreme Court has held unconstitutional," wrote Dowd, a partner at Akin Gump Strauss Hauer & Feld LLP.

Rajaratnam has pleaded not guilty to criminal charges and also faces civil charges by the SEC.

The cases are U.S. v. Rajaratnam, U.S. District Court, Southern District of New York, No. 09-01184, and SEC v. Galleon Management LP in the same court, No. 09-08811.