Almost a year after being arrested on insider-trading charges, Galleon hedge fund manager Raj Rajaratnam appeared before Federal Judge Richard Holwell for a pretrial hearing.  So did Galleon's lead attorney, Akin Gump's John Dowd.  The main event in this hearing was the issue of whether the Court should admit into evidence 2,400 wiretapped conversations between Mr. Rajaratnam and his friends and accused accomplices.  For 3 days, Mr. Dowd and his legal team will argue that the government illegally obtained the wiretap evidence by failing to disclose previous investigations of Mr. Rajaratnam by the FBI and the SEC. 

Mr. Rajaratnam, founder of the Galleon Group, was indicted on charges that he engaged in "the biggest hedge fund insider-trading case in American history."  He pleaded not guilty, along with his co-defendant, Danielle Chiesi, and their trial is scheduled for January 2011.  The case has produced 21 arrests and several guilty pleas.

    A Potential Conflict of Interest.  Before addressing the main issue, Judge Holwell called Mr. Rajaratnam to the stand for a mini-hearing to make sure he understood that his law firm, Akin Gump, had a potential conflict of interest in the case.  The conflict is that the firm also represents AM General, the maker of the Humvee military vehicles, as well as SUVs sold under the dying Hummer brand.  It turns out that Lauren Goldberg, a former federal prosecutor who worked on the warrant application and will be a witness at the hearing, is now an in-house counsel at the parent company of AM General.  (The billionaire Ronald Perelman’s MacAndrews & Forbes, where Ms. Goldberg works as SVP, owns AM General.)

After the 5-minute session, Mr. Rajaratnam waived his right to conflict-free representation and right of  appeal on the grounds of ineffective assistance of counsel. 

    Admissibility of Wiretaps into Evidence.   After that, Mr. Dowd gave a hard-hitting opening statement, according to NYT Dealbook, accusing the government of misleading Judge Gerard Lynch into authorizing the wiretaps.  He argued that because the SEC had spent more than a year building a “classic insider-trading case” against Mr. Rajaratnam, the use of wiretapping, which had never been used before in an insider-trading case, should not have been granted. “They gamed the system,” Mr. Dowd said.  A federal prosecutor, Jonathan Streeter, responded that the government acted fairly and that the unprecedented surveillance tactics were necessary because the S.E.C.’s investigation had failed to yield sufficient criminal evidence.

More coverage will follow.   [NYT Dealbook, 10/4]