UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF NEW YORK. UNITED STATES OF AMERICA, ae RAJ RAJARATNAM and DANIELLE CHIESI, Defendants. 09 Cr. 1184 (RJ) DEFENDANT RAJ RAJARATNAM’S CORRECTED! REPLY MEMORANDUM IN SUPPORT OF HIS MOTION FOR BAIL MODIFICATION John M. Dowd (admitted pro hac vice) ‘Akin Gump Strauss Hauer & Feld LLP 1333 New Hampshire Ave, NW Washington, DC 20036 (202) 887-4386 (phone) (202) 887-4288 (fax) Robert H. Hotz, Jr. (RH-4456) Samidh Guha (SG-5759) Akin Gump Strauss Hauer & Feld LLP One Bryant Park New York, NY 10036 (212) 872-1015 (phone) (212) 872-1002 (fax) Attorneys for Raj Rajaratnam ' This copy corrects a typographical error which appeared on page 5 of the brief that undersigned counsel filed with the Court earlier today.Defendant Raj Rajaratnam respectfully submits the following reply memorandum in support of his application by letter dated December 16, 2009 to modify the terms of his bail, and in response to the Government ’s January 5, 2010 opposition to Mr. Rajaratnam’s application. PRELIMINARY STATEMENT From the beginning of this case, the government has attempted to impose onerous pre- trial conditions on Mr. Rajaratnam grossly out of proportion to the imaginary “isk of flight” it claims he presents. To date, this Court has rejected those attempts, and should do so again, Originally, the government sought to have Mr. Rajaratnam detained. The Court, per Magistrate Judge Eaton, rejected that request—no doubt because Mr. Rajaratnam is accused of a non-violent offense, poses no threat to the community whatsoever, and is an American citizen with deep and extensive family and business ties to the United States and the New York community. Although Magistrate Judge Eaton did impose extremely large bail in the amount of $100 million, he expressly stated that it would be “logical” to reduce the bail amount if Mr. Rajaratnam demonstrated his compliance with the conditions of his release and pre-trial supervision, Subsequently, the govemment opposed Mr. Rajaratnam’s request to relax the restrictions originally placed on his travel. The government now claims it “consented” to that request, but that claim is false. The government flatly refused to consent to any modification to Mr. Rajaratnam’s pre-trial release conditions, including the limitations placed on his travel. Indeed, in its November 4, 2009 brief in opposition to Mr. Rajaratnam’s request, the government stated that it “continues to believe that remand is warranted, and opposes any reduction in the defendant’s bail conditions.” Then, during the November 5, 2009 hearing before Magistrate Judge Katz, the government asked for an opportunity to “object” in advance to any proposedtravel by Mr. Rajaratnam outside of the New York area, a request that the Magistrate Judge rejected, requiring only that Mr. Rajaratnam report to Pre-Trial Services in advance of any travel. Like Magistrate Judge Eaton, Magistrate Judge Katz also indicated that the Court would be willing to reconsider the monetary amount of Mr. Rajaratnam’s bail if “things are looking OK” by the end of November, Itis now the beginning of January, and things are looking OK. As noted in counsel’s December 16, 2009 letter to the Court, Mr. Rajaratnam has fully complied with the terms of his release and has dutifully followed every instruction from the Court and Pre-Trial Services—facts that he is confident Pre-Trial Services will confirm. In short, Mr, Rajaratnam has done everything that two Magistrate Judges of this Court have said would be necessary to justify a reduction in his enormous bail package, and no amount of prosecutorial hyperbole can change that fact, Nevertheless, the government continues to oppose any reduction in Mr. Rajaratnam’s bail, ostensibly because Mr. Rajaratnam “poses a serious risk of flight.” ‘That claim is far-fetched and the government knows it. Mr. Rajaratnam is committed to—indeed, he is singularly focused on —defending this case, reclaiming his reputation, and disproving the allegations that destroyed one of the most highly esteemed investment ‘management companies on Wall Street and the livelihoods of more than 125 of its employees. It is inconceivable that Mr. Rajaratnam would do anything to lend the slightest credence to the government's charges, least of all by fleeing before he has an opportunity to defend himself. It is equally inconceivable that Mr. Rajaratnam would abandon his home of thirty years and his dependent family, including his wife, school-age children, and elderly parents, all of whom live with him in New York.‘The real reason that the government opposes any bail reduction is that it wants Mr. Rajaratnam to bear the stigma of what some sources have reported is the highest-ever bail in U.S. history. See, e.g., John Camey, Rajarainam Gets Hit with Highest Bail in US. History, The Business Insider (Oct. 18, 2009) (Ex. A). Needless to say, destruction of the Defendant's reputation, and pollution of the jury pool, are not proper reasons for seeking excessive bail, and the government's arguments to the contrary are wholly unpersuasive, ARGUMEI The government begins by misstating the applicable legal standard, arguing only that it bears the burden of proving that Mr. Rajaratnam poses a risk of flight. But the government also bears the burden of showing that the proposed bail conditions are the “least restrictive” necessary to reasonably assure his appearance at trial. 18 U.S.C. § 3142(b). The government no doubt omits any reference to the second half of the applicable legal test because it knows it cannot satisfy it. For the most part, the government repeats the arguments that it made before Magistrate Judges Eaton and Katz, contending that Mr. Rajaratnam poses a risk of flight because he is wealthy, owns property abroad, and faces significant jail time if the government can prove its case, which it claims is strong. But these arguments have been considered by two Magistrate Judges of this Court, both of whom indicated that a reduction in Mr. Rajaratnam’s bail would be considered if Mr. Rajaratnam complied with the conditions of his pre-trial release, which he indisputably has done. Out of necessity, therefore, the government attempts to argue that circumstances have changed since Magistrate Judges Eaton and Katz. so opined, and that these changed circumstances militate against any reduction in bail.First, the government argues that Mr. Rajaratnam “will shortly face expanded charges that include substantially greater gains from his illicit insider trading activities,” and that these ‘expanded charges could expose him to a prison term of 15 years, as opposed to the 10 years that the government predicted when it requested detention. The suggestion, however, that this purely conjectural increase in sentencing exposure might lead Mr. Rajaratnam to flee, whereas he was previously willing to stand trial when facing a 10-year sentence, is preposterous. Mr. Rajaratnam’s sole objective is to clear his name, reclaim his reputation, and prove his innocence. The piling on of additional flawed charges only strengthens his determination to defend this case. Second, the government argues that Mr. Rajaratnam’s ties to New York “are dissolving” because his attempts “to salvage his hedge fund” have failed. This argument is wrong. The government destroyed Galleon and the livelihoods of its employees with sensational and prejudicial press conferences and by the improper public disclosure of Title IIT intercepts in open court at the initial bail hearing and in the unsealed criminal complaint. The government should not be heard to bolster its bail argument with the fruits of its own misconduct committed at the very beginning of this case. Third, the government argues that its case against Mr. Rajaratnam has grown stronger because a grand jury has found probable cause to indict him, and because the government plans to file a superseding indictment that will include new charges based on Galleon’s acquisition of stock in a company called ATI prior to the announcement of its acquisition by AMD. As an initial matter, this argument misconstrues what an indictment is. The Second Circuit has stated in the plainest possible terms that an indictment is a mere accusation and cannot be considered as evidence of a defendant’s guilt. See, e,g., United States v. Juwa, 508 F.3d 695, 701 (2d Cir. 2007) (“It is axiomatic that in a criminal trial ‘an indictment is not evidence of guilt,’ nor may italter the presumption of innocence with which every defendant is cloaked . ...” (quoting United States v. Romano, 706 F.2d 370, 374 (2d Cir. 1983)). This, of course, is because the grand jury process involves the ex parte presentation of only one side of the evidence; exculpatory evidence need not be presented to the grand jury, and basic limitations on admissibility at trial, such as the hearsay rule, do not apply. With respect to the ATI acquisition, for example, itis safe to assume that the government did not inform the grand jury that the press was reporting a surge in ATI's stock price due to widespread speculation about the acquisition weeks before it was officially announced. See, e.g., Takeover Speculation Lifts Stock, The Associated Press (June 1, 2006) (Ex. B). It is also safe to assume that the government did not inform the grand jury that Galleon filed 13-F forms with the SEC fully disclosing its acquisition of ATI stock prior to the merger announcement—an odd move if Galleon had actually been trading on inside information. (Ex. ©). This one-sided presentation of the evidence will not be possible at trial ~a fact that the government seems to forget when describing the “overwhelming evidence” of Mr. Rajaratnam’s guilt. Mr. Rajaratnam and undersigned counsel have been evaluating that evidence for the last three months and have a different view of the strength of the government's case. For example, the government's Title III intercepts do not, as claimed, catch Mr. Rajaratnam “‘in the act” of insider trading. For the most part, the hundreds of hours of recorded intercepts reflect the wholly unremarkable fact that stock traders and portfolio managers frequently talk to one another about stocks and what is happening in the stock market. More importantly, the intercepts were obtained illegally based on applications to this Court that were shot through with material false statements and misleading omissions, including mistepresentations about Roomy Khan, the nature and history of her cooperation with the government’s investigation, and her known priorcriminal conduct, which should render them inadmissible, Although the government now attempts to divorce “the instant case” from the indistinguishable “other” case in which it relied on Roomy Khan’s false allegations against Mr. Rajaratnam, it cannot undo the fact that its Title IIL applications, criminal complaint, and current charges rely extensively on a failed cooperator who has committed multiple crimes of fraud and obstruction of justice, nor can it undo its failure to timely disclose these facts to the Court. Moreover, in attempting to excuse its failure to provide Mr. Rajaratnam with notice of its intent to use Title Ill evidence during his initial bail hearing, the government merely adds to the list of misrepresentations it has made to this Court, arguing that it might have compromised its “covert” investigation if it had provided Mr. Rajaratnam with the statutorily required notice. In reality, however, there was nothing “covert” about the governments investigation. To the contrary, the government had been overtly investigating Mr. Rajaratnam for insider trading for ‘years, a fact well known to the prosecutors in this case since one of them, SAUSA Andrew Michaelson, deposed Mr. Rajaratnam under oath for several hours about precisely these topics in June 2007—another fact that the government failed to disclose to this Court in its Title IIT applications and criminal complaint, ‘The government’s remaining arguments are as unpersuasive as they are stale. It is true that Mr. Rajaratnam is wealthy—though not a billionaire, as the government and press persistently claim—but this fact cannot justify the imposition of excessive and stigmatizing bail. Every person, rich or poor, is entitled to due process and fair treatment in the courts of the United States, and it demeans these proceedings to suggest that Mr. Rajaratnam’s hard-eamed wealth justifies unnecessary, and unprecedented, bail requirements. It is also true that Mr. Rajaratnam has personal ties to Sri Lanka, where he was born, and that he owns property abroad. But Mr.Rajaratnam’s most meaningful connections—including his home, wife, children, and parents— are all in New York, and he has repatriated substantial amounts of his foreign holdings in order to finance the defense of this case. Finally, Mr. Rajaratnam’s prior international travel is of no consequence, since he is already forbidden to travel outside the United States and seeks no modification to that term of his release. CONCLUSION For the foregoing reasons, and the additional reasons stated in counsel's letter to the Court of December 16, 2009, Mr. Rajaratnam respectfully requests that the Court modify bail by reducing the size of his personal recognizance bond from $100 million to $20 million and the posted security from $20 million in cash and property to $17.5 million in property alone. Dated: January 7, 2010 ‘New York, New York 1333 New Hampshire Ave, Washington, DC 20036 (202)887-4000 Robert H. Hotz, Jr. (RH-4456) Samidh Guha (SG-5759) Akin Gump Strauss Hauer & Feld LLP ‘One Bryant Park New York, NY 10036 (212)872-1000 Attorneys for Raj RajaratnamExhibit ARaj Rajaratnam Gets Hit With Highest Bail In US History Page 1 of 5 Bs THE BUSINESS INSIDER Law Review Rajaratnam Gets Hit With Highest B: John Carney | Oct. 18,2009,1:38 PM | 10,690 | @ 24 In US History Galleon Group founder Raj Rajaratnam was been released on $5100 milion bail on criminat charges in an alleged $20 milion insider-rading scheme. Itis the highest bail ever set in the United States, See the full scandal in pictures >> US, Magistrate Judge Douglas Eaton approved bail. which is secured by $20 milion in cash and property. Several friends and colleagues reportedly offered to assist in obtaining the cash backing the bail ordered to limit his travel to a 110 mile radius of New York City He has surrendered his passports to the court. snd. Rajaratnam was released Friday and Rajaratnam has been charged with four counts of conspiracy and seven counts of secure even one of the counts of securities fraud could result in a maximum penalty of up to 20 years in prison and a fine of up to $5 milion, or twice the gross gain or loss of an illagal rade. The SEC has also filed civil charges against Rajaratnam, fraud. Conviction on See the full scandal in pictures >> Embeo Thie Post Se Aso aaa Inside Galleon: Shock and Dbeset Wit Raj Rajartnam Spend 200 Years In Jal? The Mot Makor Ray Figen =r 24 Comments http://www. businessinsider.com/rajarantam-gets-hit-with-highest-bail-in-us-history-2009-10 1/7/2010Raj Rajaratnam Gets Hit With Highest Bail In US History lemmerdsour 04 20a Se is ais the equate of he pos Ham one} seas de ‘reat. m sure th Tat Tir wt gayle hin sancuary in enor rail assistance rhe aps bal stephanie ooo 8 sosrmtase Lets hope his lor knows wal ha al he doing Dace alt fron thr, Gordon ona 183 PM es ‘bog on me acorn chargus ae conecton. hen send ITO, ees ‘aug ono 1.80 ‘ay want Mado wth gest al amount? Rovty Gordon n> eva dome t @ Serer Gordon He's Sei Lankan mara ety ‘ahi on 0 8. tae ats Youre Inn (tnt teat, morn itary 257 | wants S06 OLD HONEY in ja By aasiog Rapvatan, heya jus vowing vs 2 bono “1m sue he Ton! Tigra wat gayle sane.” Page 2 of 5 ‘Where? 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Page 1 6/1/06 Toronto Star CO7 2006 WLNR 9371331 ‘Toronto Star Copyright 2006 Toronto Star Newspapers Limited, All Rights Reserved. June 1, 2006 Section: Business Takeover speculation lifts stock SAN FRANCISCO ssociate Business Shares of ATI Technologies Inc. jumped 8 per cent yesterday after a Wall Street analyst said the Markham-based ‘geraphics-chip maker may be acquired by Advanced Micro Devices Ine., the PC microprocessor maker that’s been taking market share from Intel Comp. RBC Capital Markets analyst Apjit Walia said "recent checks in the PC-food chain suggest” the pairing "may be likely.” It would be consistent with recent announcements from AMD to boost its ability to produce significantly ‘more chips over the next few years, he wrote in a research report ATI shares gained $1.43 0 $18.10 on the Toronto Stock Exchange. AMD's stock was up 38 cents (U.S.) to $30.86 ‘on the New York Stock Exchange. ‘On Monday, AMD said it planned to invest $2.5 billion over the next several years to refurbish old plants and build ‘new factory space at its site in Dresden, Germany. Walia said speculation has raged for years that ATI or other graphics chip companies would be bought by AMD or Intel, adding the move would be a mistake for Intel, which, besides being the world’s biggest chip maker, is also the world’s biggest supplier of graphics chips. “This tie-up might make sense for AMD at this juncture but we don‘ think Intel should pursue tying up with graph ‘es companies and should instead look at the communications space,” Walia wrote. "We believe Intel is still not reading the writing on the wall and continues to over-focus on PCs." ‘An AMD acquisition of ATI would be a positive event forthe graphics industry, Walia said. Separately, Walia said Intel's revenue in the current quarter is on pace to fall almost 10 per cent from the same pe- riod last year, which would translate to about $8.3 billion - the midpoint of Intel's forecast of $8 billion to $8.6 bil- lion. © 2010 Thomson Reuters. No Claim to Orig. US Gov. Works.6/1/06 TRNTST CO7 Page 2 Associated Press ATI Technologies IP. MOCZULSKI Cp A buyout of ATI Technologies, with headquarters in Markham, would be a good move for ‘Advanced Micro Devices, analysts say. INDEX REFERENCES COMPANY: RBC DOMINION SECURITIES INC; INTEL CORP; ADVANCED MICRO DEVICES INC; ATT ‘TECHNOLOGIES INC NEWS SUBJECT: (Major Corporations (IMA93)) INDUSTRY: (LT. (11T96); Semiconductor Applications (ISE81); Electronics (1EL16); Semiconductors in Graphic Devices (1SEO8); Semiconductor (1SE88); Semiconductors in Broadband & Multimedia (1SE69), Manufacturing (UMA74); Computer Equipment Advanced Technology (ICO81); Computer Peripherals (1COS8); Visual Display (AVI97); Computer Equipment (1CO77); Video Boards (1155); PC (1PC82)) REGION: (Americas (IAM92); North America (INO39); Westem Europe (IWE41); Germany (1GE16); Europe (IEUS3); USA (1US73); Central Europe (1CES0)) Language: EN OTHER INDEXING: (ADVANCED MICRO DEVICES; ADVANCED MICRO DEVICES INC; AMD; ATI; ATI TECHNOLOGIES; ATITECHNOLOGIES INC; INTEL; INTEL CORP; PC; RBC CAPITAL MARKETS; TAKEOVER) (Apjit Walia; P. MOCZULSKI; On Monday; Walia) EDITION: ONT Word Count: 396 6/1/06 TRNTST CO? END OF DOCUMENT © 2010 Thomson Reuters, No Claim to Orig. US Gov. 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