UPDATE: Prosecutors Oppose Rajaratnam's Bid To Reduce Bail

In a brief filed Wednesday, Assistant U.S. Attorneys Jonathan Streeter and Josh Klein argued, as they have before, that the amount of time Rajaratnam is facing in the insider-trading case, his extensive travel overseas in the past and his substantial assets make him a flight risk.

"The evidence against the defendant is strong, thus increasing the prospect of conviction and the attendant likelihood that he will flee," Klein and Streeter wrote.

Rajaratnam, the founder of Galleon Group, asked a magistrate judge last week to reduce his bail to $25 million and to allow him to travel freely within the continental U.S., saying he isn't a risk to run.

Prosecutors said Wednesday a bond of $25 million, secured by $10 million in cash or property, is "paltry" and "inadequate to assure" his appearance in court.

"If the defendant has no intention of fleeing, then it should not matter to him whether the bond is $25 million or $100 million," Streeter and Klein said. " If, however, the defendant wishes to keep available to himself the option of fleeing, then a reduced bond lowers the cost of fleeing."

A hearing on Rajaratnam's bail request is set for Thursday.

Rajaratnam, a native of Sri Lanka and a U.S. citizen, is one of six people who were charged criminally earlier this month in a $20 million insider-trading case.

When he was arrested Oct. 16, Rajaratnam's bail was set at $100 million, to be secured by $20 million in cash and property. His travel also was limited to an area of 110 miles from Manhattan, so that he might be able to visit his daughter, who is in college.

In a separate letter Wednesday, John M. Dowd, Rajaratnam's lawyer, asked a magistrate judge to order prosecutors to immediately turn over court orders and applications authorizing wiretapped conversations of Rajaratnam.

"The government was required to produce this material by (statute), but impermissibily failed to do so prior to utilizing this evidence to its advantage," Dowd said.

Dowd said the government's failure to do so is "especially prejudical in this instance where serious questions exist about the credibililty of the government's primary cooperating witness."

In its brief, prosecutors took issue with a claim by Rajaratnam's lawyers that the government's case revolved around a single cooperating witness who is a " convicted felon:" Roomy Khan, a hedge-fund manager who briefly worked for Galleon in the late 1990s.

The Wall Street Journal and other media outlets, citing people familiar with the matter, have reported that Khan is a cooperating witness who isn't identified by name in the government's criminal complaint against Rajaratnam.

In their brief, prosecutors said Khan had been previously convicted of providing inside information to Galleon related to Intel Corp. (INTC).

"Furthermore, as the complaint itself makes clear, the defendant's assertion that the government's case hinges on a single witness is false," Klein and Streeter said. "This case involves wiretap evidence of the defendant making incriminating statements and would be strong even absent the testimony of any cooperating witness. In addition, there is more than one cooperating witness against the defendant."

The Journal has reported that Khan has agreed to plead guilty to securities and conspiracy charges and cooperate in the case against Rajaratnam.

It's unclear from the government's filing if prosecutors are acknowledging that Khan is a cooperating witness, or if they're simply responding to allegations raised by Rajaratnam's lawyers.

Prosecutors also cited the winding down of the Galleon hedge fund as a reason for an increased risk of flight by Rajaratnam, saying his attempts to salvage the fund appear to have failed.

"Galleon has received a substantial number of redemption requests and is currently being liquidated," Klein and Streeter said. "This fact constitutes a significant change in circumstance from Oct. 16, the date of the original bail hearing. It is now clear that, far from anchoring him in New York, the defendant's business, as well as his ties to New York, are dissolving."

-By Chad Bray, Dow Jones Newswires; 212-227-2017; chad.bray@dowjones.com

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  11-04-091606ET
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