"Who's your 'sugar-daddy'?"

That's essentially what federal prosecutors are asking defense witness Richard Schutte, former president of Galleon Group.  Mr. Schutte, under cross-examination, admitted that Raj Rajaratnam's family invested some $15 million in Mr. Schutte's hedge fund  - - just 8 weeks before the trial started.  And, on top of an initial $10 million investment made months earlier.

Mr. Schutte started his own hedge fund, SpotTail Capital Advisers, as he was unwinding Galleon after Mr. Rajaratnam’s arrest in October 2009.  Currently, the fund manages about $35 million - you do the math. 

Reed Brodsky, a federal prosecutor, finished his cross-examination of Mr. Schutte with this detail.  It was the first time jurors had heard of the investment.  On direct examination, the defense had never even mentioned the existence of SpotTail.

        R-E-S-P-E-C-T.   The defense quickly sought to defuse the notion that Mr. Rajaratnam’s SpotTail investment was meant to encourage Mr. Schutte’s testimony.  After all, Mr. Schutte, a former Goldman Sachs analyst, was respected as a money manager.  Which is why Mr. Rajaratnam initially hired Mr. Schutte in 2004 as a portfolio manager.

Until this encounter, Mr. Schutte's testimony - which began Monday - had featured hundreds of exhibits in an attempt to show the meticulous, research-oriented investment strategy employed at Mr. Rajaratnam's Galleon Group.  The exhibIts also were an effort by defense to demonstrate that the information Mr. Rajaratnam used to make his trades were already public - i.e., details about the deals and earnings reports at the center of the insider-trading charges against Mr. Rajaratnam which were, in fact, public and could have been derived from research and analysis.  Prosecutors have countered that that the issue is not whether the information was publicly available as rumor or speculation, but whether Galleon had actually used that information to inform its trades, instead of using confidential information to do so.

For further details on this witness and the next - Gregg Jarrell, a professor at the B-school at U. of Rochester and a former top economist at the SEC - go to:   [NYT Dealbook, 4/14/11, "Galleon Chief Put Millions .."]