Raj Rajaratnam’s Galleon Group was such a tightly run, technologically advanced, brainy ship that it didn’t need inside information to get ahead, a former exec of the hedge fund told a Manhattan federal court jury this morning.
Rick Schutte, an ex-president and chief operating officer, told the jury during the first day of Rajaratnam’s defense that the hedge fund, with its technological advantage and its “disciplined” approach, didn’t need illegal tips to make money.
Schutte, who came to Galleon in 2004 from Goldman Sachs, described a strict schedule for the company’s 60 or so traders, research analysts and portfolio managers, including:
* Work days that started at 7 a.m.
* Daily meetings at 8:30 a.m.
* Weekly 5 p.m. Friday deadlines for analysts’ reports.
In fact, Galleon was so strict, Schutte told the jury, it fined employees $25 each time they were late to the morning meeting.
Schutte also described Rajaratnam, the 53-year old billionaire founder of Galleon, who’s at the center of the high-profile insider trading case in Manhattan federal court, as the smartest guy in the room, calling him “amazingly educated” on a wide range of topics.
Rajaratnam had six computer screens on his desk, compared to just two or three for the analysts, and a sliding window that allowed him to communicate directly with traders, Schutte said.
He also typically asked the most questions at the morning meetings, and was “always the most prepared of any of us come Monday” after reading analysts’ reports over the weekend, the former executive analyst said.
“It’s surprising to me how educated he is on the topics,” Schutte told the jury today.
“Have you ever seen him ask for inside information?” defense lawyer Michael Starr asked.
“No,” Schutte replied.
Schutte’s testimony is aimed at buttressing the defense’s case that Rajaratnam traded on carefully and expertly crafted research — not in illegal insider information as the government has charged. The prosecution hasn’t challenged Galleon on whether it did its homework, but has presented evidence to show that Rajaratnam cheated by trading on confidential inside information about mergers and corporate earnings.
Schutte marks the third of just five or six defense witnesses to be called, suggesting the defense’s case is on track to end by Wednesday, as predicted.
Earlier today, the defense called two witnesses to undermine the testimony of another former Galleon employee, Adam Smith, who said he traded on illegal tips that he shared with Rajaratnam.
Smith testified that he never denied knowing about inside information at Galleon when he spoke to Rajaratnam’s lawyers in 2010 after his boss’s arrest. A defense lawyer who interviewed Smith at the time told the jury this morning that Smith initially denied knowing about any insider trading at Galleon.
In a follow-up meeting in July 2010, Smith conceded to having received some information that he worried was confidential, the lawyer said.