Rajaratnam can call a Superman to trial: judge

Hedge fund manager Raj Rajaratnam hopes a Superman will be able to help him win over the jury at his insider trading trial.

The judge ruled on Tuesday that American social activist and educator Geoffrey Canada, who appeared in the award-winning 2010 documentary film Waiting for 'Superman' can attest to Rajaratnam's character.

His Harlem Children's Zone in New York has benefited from the Galleon Group founder's philanthropy and board service. Canada, along with other nationally-known figures such as Microsoft founder Bill Gates, appeared in the film that won a best documentary award at the 2010 Sundance Film Festival.

I will allow the character witness because the government itself has raised the issue of alleged greed by the defendant, U.S. District Judge Richard Holwell said before the jury came into the courtroom on the second day of the defense's case.

In what federal prosecutors have described as the biggest probe of insider trading at hedge funds, Rajaratnam is charged with conspiracy and securities fraud in a case in which 19 out of 26 defendants have pleaded guilty.

Prosecutors contend Sri Lankan-born Rajaratnam made an illicit $63.8 million. If convicted, the 53-year-old hedge fund manager could be sentenced to up to 20 years in prison.

The defense began presenting its side of the case on Monday. Before that, the jury heard five weeks of government evidence, including FBI phone taps and three friends-turned-prosecution witnesses, as prosecutors tried to show that between 2003 and March 2009 Rajaratnam gained an unfair trading advantage from highly-placed corporate insiders.

Rajaratnam's chief defense lawyer, John Dowd, had asked the judge on Monday if he could call Canada because prosecutor Jonathan Streeter told jurors at the trial's March 9 opening that the case was about greed and corruption. Dowd said jurors should also hear about Rajaratnam's philanthropy.

Canada is expected to testify this week. The defense has not decided whether to call Rajaratnam to testify. The Manhattan federal court jury could hear closing statements by Friday.

Meanwhile, the jury heard more on Tuesday from former Galleon chief operating officer Rick Schutte, the third witness called by the defense since it began its side of the case.

A defense lawyer, Michael Starr, talked Schutte through dozens of emails, stock research reports and documents, some marked Galleon confidential.

Starr asked Schutte to explain to the jury such terms as a core long position and trading around a position.

Through Schutte, defense lawyers are portraying Galleon as a tightly-run firm in which Rajaratnam demanded discipline, challenged analysis and studied research and public data to make trading decisions.

Before Schutte began his testimony on Monday, the defense called two witnesses to try to discredit the earlier testimony for the government of a former Galleon portfolio manager, Adam Smith. He has pleaded guilty to criminal charges in the case.

The case is USA v Raj Rajaratnam et al, U.S. District Court for the Southern District of New York, No. 09-01184.

(Reporting by Grant McCool, editing by Dave Zimmerman)