Posts Tagged ‘insider trading’

Who Are the Real Victims of Insider Trading?

Thursday, August 18th, 2011

 

Last week, the prosecution and the defense filed their sentencing memoranda in the Rajaratnam case.  Raj was convicted of 14 counts in all — 9 counts of securities fraud, and 5 conspiracy counts.  So what do the parties think that’s worth?  The feds asked Judge Holwell to sentence Raj in the range of 19.5 to 24.5 years.  The defense didn’t make a specific request, just said it ought to be “well below” what the feds want.

So 20 years, huh?  Wow, he must have been an awful bad guy.  Must have hurt a whole lot of people, right?

After all, a mugger in a dark alley only takes one person’s wallet.  A “white-collar criminal” can steal from thousands of people — and takes not just their wallet, but their life savings!  Right?

Well, hang on.  Did Raj actually steal from anyone?  How many investors did he really harm?  And did any of them really lose enough money to warrant locking someone up till we all have flying cars and jetpacks?

Judging from the feds’ sentencing memo, you bet.  Just look at this, from the introduction:

Raj Rajaratnam’s criminal conduct was brazen, arrogant, harmful, and pervasive.  He corrupted old friends.  He corrupted subordinates.  He corrupted entire markets.  Day after day, month after month, year after year, Rajaratnam operated as a billion-dollar force of deception and corruption on Wall Street.

Wow, that sounds awful.  So the victims are… who again?

But wait, there’s more:

Rajaratnam repeatedly leveraged the power of money and his position as the head of a 7-billion dollar hedge fund to induce friends, employees, and associates to participate in his criminal activities.  Although already rich, Rajaratnam did this to drive up his personal wealth through profitable trading in his hedge fund.  He did it to make sure that investors did not pull their money out of Galleon and to attract new money to his fund.  And he did it because of his egomaniacal drive to triumph over his competitors on Wall Street.

Again, wow.  (The feds sure like their adjectives, don’t they?  Comes off a tad over-the-top, if not insulting to the intelligence.)  So he was trying to increase his wealth, gotcha.  But at whose expense?  Guess we have to read more:

That was what he cared about: money and success.  What he did not care about, at all, was the extensive harm he left in his wake: harm to the capital markets; harm to the average, ordinary investors who played by the rules; harm to the companies whose secret information was misappropriated; and harm to the lives of those he corrupted.

Well, that sounds a little more like it… but again, who was harmed, and how?

Although particular investors on the other side of Rajaratnam’s illegal trades are not easily identifiable, there should be no question that ordinary investors paid the price for Rajaratnam’s crimes and that public companies were harmed by Rajaratnam’s repeated theft of corporate secrets.

Oh for crying out loud.  Are they joking?  Stripped of its demagogical rhetoric, this translates to “We have not identified any actual victims.  But we shouldn’t have to.  It’s obvious that lots of people must have been harmed, even if we don’t know who they were.”

If they don’t know who — or even whether — anyone was actually harmed here, how in blazes do the feds justify asking for 19.5 to 24.5 years of imprisonment?  Here’s how:

[The feds want that much time because they feel it is] proportionate to the historic nature of his crimes.  He is arguably the most egregious violator of the laws against insider trading ever to be caught.  He is the modern face of illegal insider trading.

That’s it.  That’s all.  “Because this is the first time we’ve ever caught someone so red-handed,” and “because this case got so much press.”  Those are the sole reasons why they are looking to put this guy away until he dies of old age.

Really?

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For the record, we’re predicting (more…)

Answering Your Most Pressing Questions

Saturday, July 16th, 2011
Real nice, Google.

Because we were bored out of our skull this afternoon, we checked this blog’s stats on Google Analytics.  Browsing through the various keywords people have used to find this blog over the past year, all we can say is “The hell is wrong with you people?”

Leaving aside the freaks and weirdos (and possibly some of their clients), however, it seems that most people find this blog by asking Google the same handful of questions.  The number one search engine query that get people here, every month this year, is something along the lines of “why become a lawyer.”  Number two includes variations on a theme of “can a cop lie about whether he’s a cop.”  The top five are rounded out by queries about what crimes Goldman Sachs may have committed, connections between Adam Smith and insider trading, and what one should say to a judge at sentencing.

We’re not sure that we’ve actually discussed all of these topics here.  Then again, we might have, and just forgot it (which is a distinct possibility — these posts are all written in a single pass, without any real editing, and usually are not given another thought once they’re posted.  If you ever wondered what “ephemera” meant, you’re looking at it right now.)

Still, in the interests of alleviating our boredom public service, here are some quick answers to our readers’ most pressing questions:

1. Why Should You Become a Lawyer?

Because you feel a calling to serve others.  Because you want to make a difference in the lives of others.  Because you are genuinely interested in the rules by which human society functions, why people behave the way they do, and the policies and interests underlying it all.  If those are your reasons, then you belong.

Not because you want to (more…)

Insider Trading, Expert Networks, and a Big Honking Due Process Violation

Wednesday, March 2nd, 2011

 

 

First, a shameless plug: Tomorrow, we’ll be participating in a Dow Jones webinar for Private Equity and VC types, discussing how the current environment of insider-trading prosecutions affects them, and what they might do about it.  (Link here, if you’re interested.)  Of course, those guys aren’t so much the focus these days as, say, hedge funds and the expert networks that help them make investment decisions.  “In the spotlight” doesn’t begin to describe it.  Not a week goes by without some major news about insider trading allegations in the hedge fund world.

With all that reporting, and all the various cases that are going on, one might think the issues are pretty well understood by now.  But they’re not.  Not even by the very people who are doing the prosecuting and investigating, it seems.  It so unclear that a month ago the Managed Funds Association formally asked the SEC for guidance on what is and is not kosher when dealing with expert networks.  “Our industry would like to know where the sidelines are right now so that we can stay well within them,” MFA president Richard Baker said at the time.  “The trouble is the referees aren’t quite clear where those lines are.”

Amen.  Nobody knows where the line is between lawful and unlawful conduct.  The feds themselves admit it.  And yet they are prepared to prosecute people for crimes, when the public has no way of knowing that such conduct was criminal.  Even an investigation is enough to destroy a reputation, wipe out a career, erase a business.  A conviction will take away a real person’s liberty and rights.  Americans don’t allow their government to do that in a gray area.  But it is happening.  How that is not a serious violation of basic due process is beyond us.

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Expert networks are a fairly new thing.  It used to be that research was conducted by analysts who were more akin to investigative journalists than anything else.  They poked around, talked to people, and tried to piece together useful information about a company’s value or where an industry was headed.  The goal was to gain an insight that had value — something that wasn’t obvious to everyone else analyzing the public information.  Then along came Regulation FD, and all that changed.

Reg FD came about in 2000 as an attempt to (more…)

White-Collar Wiretaps

Friday, December 17th, 2010

This’ll be quick, because we’re pretty busy working on a wiretap case, which is always time-consuming if done right.  But as our mind’s on that topic anyway, we thought we’d quickly point out that the latest round of insider-trading cases is again largely derived from wiretaps.  Here’s a roundup over at the WSJ’s law blog.

We just wanted to jump in and point out that just because there were wiretaps, by no stretch of the imagination does that mean the case is a slam dunk.  There are all kinds of ways that agents and prosecutors can and do screw up wire cases.  If properly challenged, the recordings and all evidence gotten as a result of them can get thrown out, which pretty much kills the case.  Don’t go saying this can’t happen, because we happen to see it plenty.  (The one we’re working on right now is a prime example of how not to conduct a wiretap investigation, for example.)

But even if the evidence doesn’t get suppressed, that doesn’t mean it can’t be successfully attacked at trial.  Cross-examining taped evidence isn’t the easiest skill to master, but it’s definitely doable.

If you’re really interested, you can go take our CLE lecture on how to defend these kinds of cases over at West Legal Ed Center (shameless plug).  Or if you prefer, here’s a quick cut-and-paste from a longer post we put up the first time this happened, when the Galleon case broke (original post here):

Wiretap evidence is anything but a sure thing. We know. We did wires for years in the Rackets Bureau of the Manhattan DA’s office, and now we defend them. We’ve taught a nationwide CLE on how to successfully defend them for West LegalEdCenter. Wiretaps are not a sure thing.

They can be defeated with technicalities. Eavesdropping is probably the greatest invasion of privacy that the government can inflict, and so we make law enforcement jump through all kinds of hoops before they are allowed to get an eavesdropping warrant. There are so many i’s to dot and t’s to cross, that the feds hardly use wiretaps in the first place. You’d think otherwise, but (more…)

The Feds’ Insider-Trading Gamble

Tuesday, November 23rd, 2010

 

The feds are really ramping up their insider-trading enforcement.  But instead of going after real insiders, they’re going after consultants and investors who use them.  This is a big risk for the feds, and they could lose big.

It started a year ago, when the feds indicted a bunch of people in what we collectively refer to as the “Galleon” case.  For the first time ever, the feds had used wiretaps in a white-collar investigation.  It looked like the gloves were coming off, and the feds were going to start getting down and dirty, using street-crime law enforcement techniques to go after Wall Streeters.

Then in May, Lanny Breuer announced a “new era of heightened white-collar crime enforcement — an era marked by increased resources, increased information-sharing, increased cooperation and coordination, and tough penalties for corporations and individuals alike.”  In the wake of an economic bubble bursting, they were gunning for the suits who had profited.  And unlike the last time they tried, in the wake of the dot-com bubble, now there was no 9-11 to divert their resources.

To some extent, such a strategy is like shooting fish in a barrel.  Real frauds like Ponzi schemes and the like, which can hide amidst a rising market, come to light pretty easily when the market collapses.  And we saw a lot of those prosecutions in the past couple of years.

But to a larger extent, it’s a political strategy.  Going after those who make money by moving it around, instead of creating something of value, is always going to be a populist move.  It wins brownie points for the DOJ and the president.

And now comes the takedown.

On Saturday, the Wall Street Journal reported that the feds had been conducting a 3-year investigation into possible insider trading.  They had been approaching people out of the blue, telling them they were in trouble, and suggesting that they wear a wire (with at least a couple people refusing to do so, and then emailing all their clients to tell them what had just happened).  The feds had been subpoenaing records for a while.  The targets seemed to be Goldman Sachs and consultants who matched knowledgeable industry leaders with hedge fund managers looking for an edge.

That seems to have forced the feds’ hand, and on Monday they started executing search warrants at Diamondback Capital Management and Level Global Investors, which had been identified in the Saturday story.  Then they raided Loch Capital Management later in the day.  We hear that more raids are coming, and as we speak a lot of investment firms are doing some heavy internal reviews, to figure out if they might be on the list.

Because nobody knows what kind of behavior the feds are going after.  And if past performance is any indicator of present results, the feds may just well be going after perfectly innocent behavior.

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The reason is that the feds don’t seem to understand the (more…)

Feds Could Lose Galleon Case

Saturday, October 24th, 2009

sunken galleon

Colleagues joke that we ought to be peeved that neither Raj Rajaratnam nor any of his codefendants even called us. After all, we’re one of the few white-collar defense attorneys who also know how to defend wiretap cases. But because we’re not on the case, we’re now free to comment on it. (And we have been doing so, getting quoted this week by Forbes and Bloomberg, among others.)

And we think the feds could easily lose this case, if the defense attorneys do their job well.

You’d think that this would be a slam dunk. First of all, it was a case investigated by the fine folks at the SDNY, who are without exception bright, hard-working and of sound judgment. They tend to make sure they’ve built a rock-crusher case before they bother filing charges and issuing press releases. Unlike some other prosecutor’s offices we could name, the Southern District is definitely not amateur hour. When one defends a case they’ve built, one where they’ve ensured that all the potential holes are plugged, the bulk of the defense attorney’s role is simply fighting for a better plea offer.

Secondly, this was a freaking wiretap case. The defendants are on tape, we are told, using their own phones, committing the crimes in their own voices. How much more of a slam dunk could this be?

Well, from where we sit, it’s anything but a slam dunk. In fact, from the defense point of view, we actually think this case is winnable.

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What are we talking about? Two things.

First, this may be the biggest insider trading case in history, but so far as insider trading cases go, this one ain’t the strongest.

Second, this may be the first time a securities fraud was investigated using wiretaps (and now that Spades have been broken, you can bet your sweet bippy that wires are going to start happening a lot more in these kinds of cases), but there are ways that a good defense attorney can fight that kind of evidence and win. Believe it or not, but it’s the truth.

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First, let’s talk about the alleged insider trading.

Insider trading is a relatively new crime, only added to 18 U.S.C. during the new millennium. (We’re not so sure it should be a crime in the first place — it prevents those with relevant market information from acting on that information; it is an artificial yoke on market forces that affect not only share prices but also the flow of such information, causing inefficiencies and black markets in info; it prohibits those who worked to create a gain in share prices from realizing their fullest profits from their work; it prohibits the best and truest information from being a basis for share price; it encourages and protects the holding back of information that by rights should have been public in the first place. If we had our way, not only would insider trading not be a crime, it would be a requirement. But apart from Adam Smith and the Japanese, we’re not sure too many folks agree with us on this one.)

The crime of Insider Trading is committed when, first, there is some secret, non-public information. Next, there has to be someone (like an executive or director) who has a fiduciary duty not to disclose that information, a duty owed to the owner of the information (like the shareholders). Next, the secret info has to be shared in violation of that fiduciary duty. Finally, the person who uses that information had to know that it had been shared in violation of that fiduciary duty.

That’s a lot of steps. That’s a lot of room for reasonable doubt.

Look at this Galleon case. You’ve got some insiders, who allegedly spilled the beans to an informant, who then passed on that information to the Galleon crew. How the heck does one prove — prove — that Rajaratnam knew in his own mind that this second-hand information he got came from a breach of a third party’s fiduciary duty? He didn’t deal with the insiders, he dealt with someone else who had spoken with the insiders. Even if the informant said point blank that this was inside info, that doesn’t mean Rajaratnam knew it to be so. It’s like a big game of “telephone.” It’s hearsay by the time the info gets to him.

And once the secret info has been shared, is it even secret any more? The cat’s out of the bag. Maybe the insiders and the informant should be charged, but when the informant passed that no-longer-secret info on to Galleon, how is that insider trading any more? (Oh, and what hay we could make with the fact that the insiders themselves don’t seem to have been charged in the first place. That is verrrrrry suspicious.)

From what we’ve seen in the papers released by the DOJ, the evidence does not necessarily show actual subjective knowledge on the part of Rajaratnam that the information had really been shared in violation of a specific fiduciary duty owed by particular people to particular others. “Knowledge” is not the same as “probably” or “it must be so.” That’s the mental state of “recklessness,” not “knowledge.” The feds cannot prove this case by a kind of res ipsa loquitur argument.

The case just isn’t that straightforward on the merits. In addition to the arguments I just mentioned, and about half a dozen others off the top of my head right now, a good defense attorney is going to raise all kinds of doubt with the convoluted nature of the alleged schemes. How can one prove knowledge about the original state of the fiduciary breach when the information is supposed to have followed such a tortuous path, even going backwards in one instance, before being acted on?

And what was Rajaratnam’s job? What was the hedge fund’s job? Their job was to gather information. Every stock trader’s job is to gather information. You keep your ear to the ground, listen to the rumors, find out what the scuttlebutt is. And it seems like everyone and their mother has a tip. A rumor. A sure thing.

None of that is insider trading. That’s just Wall Street. The trick to being a successful trader is figuring out which “sure thing” is likely to be right. The decision may be based on a lot of number crunching, or on a gut instinct, but it’s always a judgment call. The successful trader’s judgment calls are just a little better than others’ are, that’s all. And Galleon was one of the successful ones.

The press has raised eyebrows at Rajaratnam’s “relentless pursuit of data,” as the WSJ puts it. Well, duh, that’s his freaking job. If he wasn’t relentlessly pursuing data, he wouldn’t be in the business. If the prosecution tries to make that look incriminating, like he was seeking or desperate for illegal info, a good defense attorney will defuse it with a simple dose of reality.

And the prosecution needs to convince all 12; the defense only needs one to be unsure. The defense would like to convince all 12, but they don’t need to. There is plenty of room for argument on the merits alone.

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And while we’re talking about the merits of the case, this may be an opportunity for defense counsel to go to the prosecutors and convince them not to seek an indictment. It’s tough, when the prosecutors have made statements to the press and put their own integrity on the line. But a prosecutor of real integrity will always put that aside and do the right thing.

The trick is getting them to see that their present position is wrong. Stupid defense attorneys just whine and beg and plead, but that only works on stupid prosecutors. A halfway-decent prosecutor has made up his mind based on the evidence he’s got. That may only be a thin sliver of reality, and it may well be completely out of the proper context, but it is what he understands reality to be.

The only way you’re going to change a prosecutor’s mind is by either giving them new information that they didn’t already have, or by giving them a new way of looking at the evidence before them.

That is advocacy. And in a case like this, it may behoove defense counsel to advocate fiercely for a rethinking of the charges. Strategically, it may not be the best choice, because of all the press this case has garnered, meaning that the prosecution might just as well be presumed to be inflexible. But we did precisely this in the Bear Stearns subprime hedge fund case, and the manager we represented did not get prosecuted. And that case had just as much, if not more, publicity at the time. It’s an option, here, at the very least.

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But what about the wiretaps? How do you get around that? Isn’t that pretty much the defendants convicting themselves out of their own mouths?

No way.

Wiretap evidence is anything but a sure thing. We know. We did wires for years in the Rackets Bureau of the Manhattan DA’s office, and now we defend them. We’ve taught a nationwide CLE on how to successfully defend them for West LegalEdCenter. Wiretaps are not a sure thing.

They can be defeated with technicalities. Eavesdropping is probably the greatest invasion of privacy that the government can inflict, and so we make law enforcement jump through all kinds of hoops before they are allowed to get an eavesdropping warrant. There are so many i’s to dot and t’s to cross, that the feds hardly use wiretaps in the first place. You’d think otherwise, but it’s so. Plus, they have to go through so many steps in the chain of command to get permission to apply for a warrant, that by the time they could have done so the need or probable cause has evaporated. State prosecutors do way more wires than the feds do.

Because the feds rarely do them, they’re not necessarily as on the ball as certain state-level offices might be. And except for those few high-caliber state offices, the locals can be even more error prone.

That’s big, because little errors in wiretaps have big consequences. Usually, they mean the government loses the case. A little oversight leads to the suppression of all the evidence derived from that point forward in the case, and a multimillion-dollar investigation just went down the toilet. No bullshit.

What kinds of technicalities are there? Tons. Some are just stupid. One particularly stupid requirement is the “sealing” requirement. The idea is that we don’t want to risk having the tapes or CD-ROMs of the intercepted conversations tampered with. We don’t want Nixonesque 17-minute gaps in the evidence. We want the assurance that the evidence never had a chance to be fucked with, and is as pristine now as when it first came in. And so the law requires that the tapes or CDs be sealed immediately, which usually means having them wrapped in evidence tape and having a judge sign and date the tape with a Sharpie.

But “immediately” doesn’t mean “immediately.” Instead of sealing the tapes right after they were recorded, the law says they have to be signed within 24 hours after the expiration of the warrant. Warrants are typically good for 30 days. So the whole month’s worth of tapes or CDs have to be assembled and sealed no later than 24 hours to the minute after the expiration of the wire. And that can be a tough deadline to meet. Especially when, say, it’s 5:04 on a Friday afternoon and all the judges are on their way out of town for the weekend. Or when, out of the hundred or so tapes for that month, one of them by accident didn’t make it into the group to be sealed, which can easily happen. Or when the judge took forever reading that 160-page renewal application, and the deadline passed when he’d only signed half the tapes.

This 24-hour rule is not a “good faith” or “close enough” rule. 24 hours and one minute means the evidence on those tapes cannot be used, and any evidence that resulted from what was heard on those tapes must be suppressed. The case is over. It’s technicalities like these that make prosecutors sweat and cross their fingers and hope the defense attorney won’t be paying attention.

Another technicality, believe it or not, is who signed the warrant application in the first place. The law is very particular about who is allowed to sign the application. Only certain enumerated DOJ officials, or the elected head of the DA’s office, are allowed to do it. We once had to work pretty hard when a very good defense attorney named Marty Adelman noticed that we’d had a substitute sign on behalf of Mr. Morgenthau when the boss was out of town. We had to prove that he really was legitimately unavailable, not merely at a function or indisposed, and that the substitute was the legitimate second-in-line. We’d done it right, of course, but others don’t. At one point, about a gazillion wiretaps had to be thrown out because the U.S. Attorneys in D.C. were having them signed by someone not on the authorized list.

The big thing, of course, when trying to controvert an eavesdropping warrant, is not the technicalities but the probable cause.

There has to have been probable cause to believe that a particular crime, listed in the wiretap statute, was being committed. That evidence of that crime would be found by listening in on a particular phone. That a particular named person would be using that phone, whose conversations would be evidence of the crime. And traditional investigative methods like surveillance, undercovers, informants, subpoenas, etc. wouldn’t get the job done.

That’s a lot to prove. The warrant applications have a heavy burden to meet. A good defense attorney is going to look for chinks in the armor, weaknesses in the alleged probable cause, and is going to fight hard to get the warrants and all their fruits thrown out.

And doing that work, and making the prosecution work hard to defend itself, and letting them know that they’re going to be working this hard for the rest of the case, can convince them to rethink their plea position at the very least.

When looking at probable cause, a decent attorney is going to notice whether the warrant application sections laying out the arguments are just boilerplate, cut-and-pasted from earlier applications, or whether they actually are tailored to the investigation as it then stood. Boilerplate, if it doesn’t really apply here, is a fraud on the court! That warrant and everything thereafter just got thrown out.

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Well, what if the defense litigated the eavesdropping, but it’s all still coming in? They’ve got a trial on their hands. What do they do now? They can’t fight the tapes in front of a jury can they? How can you possibly cross-examine taped evidence?

It ain’t easy, but a smart lawyer can do it.

First of all, you have to realize how wires get started. They don’t come out of the blue. Probable cause does not land in some cop’s lap.

There’s an easy way, and a hard way, to start a wire. The hard way is to have all this suspicion, based on historical intel about your players, surveillance of their movements, and scuttlebutt from the community. Then you track down their phone numbers, and subpoena tons of call records to see who they’re calling and when. Then you look for patterns, and see what you can dig up about the people they call. And you try to put together a res ipsa argument that this criminal activity must be going on over that phone. That ain’t the easy way.

The easy way, like with any investigation, is to flip an informant. Someone screws up, and now needs to work off a likely sentence. The only way they can do that is by getting someone else in trouble. So they agree to wear a body wire, or introduce an undercover, or (usually) consent to the recording of their own phone calls with the target.

Bang. Right there, we’ve got all kinds of arguments for reasonable doubt. Arguments to piss the jury off at the government and want to acquit our client.

Because what is the informant trying to do? He’s trying to get our client in trouble. He’s trying to elicit an incriminating statement over the phone that’s going to let the government tap that number. That doesn’t just happen.

No, that call is going to be scripted. Or rehearsed. Or both. That call is going to have a purpose, and Mr. Informant is going to do whatever he can do to manipulate that conversation so he gets the incriminating words he wants. Or at least words that sound incriminating.

You see where this is going, don’t you? You may never use the word “entrapment” itself, but by golly you’re going to plant that concept in the jury’s mind. That informant was out to save his own skin. That informant did not tell our client the truth. That informant lied about what that conversation was about. Those lies were scripted and rehearsed with the agents beforehand. This whole case is built on lies. And the conversation didn’t go according to plan. Our client was not about to incriminate himself. So that informant manipulated him, changed the subject, hounded him, cajoled him to say things he otherwise never would have said. Throw some in-check indignation, and you can have one pissed-off jury.

And you fight the recordings themselves. “But look at the transcripts, they’re cut and dried,” you say? Poppycock. Those transcripts are nothing but interpretation. Any defense lawyer who sits back and relies on the government’s own interpretation of what is on those tapes needs to find another line of work.

Because everything on those recordings is open to interpretation. Nobody in the real world speaks in clear prose, with footnotes explaining their jargon and inside references. Nobody talks like that.

People throw ideas around. They talk things through. They change their mind. Taken out of context, a statement on Day 1 can sound really incriminating. But in context with a statement on Day 2, it’s perfectly innocent.

People talk in code. Not just spies and crooks, but everyday folks. Nobody spells it all out, that would infuriate the listener. Stuff that the other person also knows goes unsaid. People use jargon that outsiders can easily misinterpret. Phrases like “you’re going to put me in jail” could really be a schtick between friends for “my boss isn’t going to like this,” rather than the literal meaning. But taken out of context, perfectly innocent words can sound damning. Any one of us could face prosecution if our own conversations were selectively lifted out of context.

So it is critical that the defense listen to all of the intercepts, not just those highlighted as the prosecution’s greatest hits. The defense needs to get the whole context, and be able to explain ostensibly incriminating conversations as being perfectly innocent. The client should help as much as possible.

Other room for interpretation is what the freaking words were in the first place. We had plenty of occasions where we listened to a tape and heard one phrase, our detectives heard at least two different phrases, and our trusted paralegals heard it yet another way. Nobody enunciates every consonant. Speech is casual. It’s rushed. It’s muddled. It’s amazing that our brains can separate out as much as we do. But in doing so, we often see patterns where they don’t exist, and hear words and meanings that were never said. It’s like optical illusions for the ear, and they happen all the time. Have an inaudibility hearing if you have to, and get the statement tossed altogether if need be.

So any fool who relies on the government’s transcripts deserves to be called a fool. Make your own dang transcript, and make sure you can sell it to the jury. You want to be the voice they trust.

There are tons of other ways to tear the intercepts apart. These are just a starter. But this post is already getting far too long and we’re getting sleepy.

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The point is that the Galleon case is built on wiretaps, and the “greatest hits” released by the DOJ in its press releases seem eminently attackable. The rest of their recordings are probably even more open to attack. And the merits look pretty darned shaky to begin with. They have to prove actual knowledge, that doesn’t seem to be all that obvious. The ties to the people with the actual fiduciary duty are second-hand at best, and the tie is a lousy rat out to save their own skin. And the insiders are suspiciously not even being prosecuted themselves?

Based on the little that has been released, this case seems to be a prime candidate for reasonable doubt. It just doesn’t look like a slam dunk. The defense has a pretty good shot at winning.

We’ll keep watching, and wish the best of luck