Can The SEC Get Its Hands On Wiretaps In Raj Rajaratanam’s Case?

The other day, the Securities and Exchange Commission asked the Manhattan federal district court (yes, Judge Jed Rakoff’s court) overseeing its civil claims against Raj Rajaratnam in the Galleon hedge fund insider trading case to order the defendants to turn over to the SEC the wiretap recordings that had been obtained by the Department of Justice, and then turned over to the defendants in connection with the DOJ's criminal prosecution in the case.

This is a fascinating subject, with an answer that is not so clear. There’s Title III of the Omnibus Crime Control and Safe Streets Act of 1968 to consider, and a recent decision by the U.S. Court of Appeals for the Second Circuit holding that Title III “created a strong presumption against disclosure of the fruits of wiretap[s].” The counter position: there essentially is no limit except what is specifically provided in Title III on what the government, as the government, can do with lawfully obtained wiretaps, including using them in a criminal prosecution by one arm (the DOJ) and a civil suit by another (the SEC).

For more background, see the piece in the Times by Peter J. Henning, at http://dealbook.blogs.nytimes.com/2010/01/28/can-the-sec-get-the-galleon-wiretaps/?ref=business. The SEC's submission to Judge Rakoff also is available there.