The jury in hedge fund manager Raj Rajaratnam's trial asked to listen to replays of phone taps that prosecutors consider to be the centerpiece of Wall Street's biggest insider trading case in a generation.

Rajaratnam's voice filled a Manhattan federal courtroom on Tuesday as jurors weighed for a second day government charges that the Galleon Group founder had made tens of millions of dollars illegally by trading on tips about mergers and corporate earnings that had yet to be announced.

Defense lawyers argue that the former billionaire's trades were guided by research and public information.

Jurors deliberated for 7-1/2 hours, following four hours of deliberations on Monday. They are expected to resume their discussions of the evidence on Wednesday.

In a separate case, a former trader associated with Galleon became the latest to admit wrongdoing in the sweeping federal probe into insider trading on Wall Street.

Craig Drimal, who prosecutors said had an office on Galleon premises but was not an employee when he was arrested in November 2009, pleaded guilty to charges of securities fraud and conspiracy. His hearing took place four floors above the locked room where 12 jurors were considering Rajaratnam's case.

Prosecutors accuse Rajaratnam of making an illicit $63.8 million between 2003 and March 2009 through tips from a network of highly placed insiders such as Rajat Gupta, a former Goldman Sachs Group Inc director and worldwide head of the consultancy McKinsey & Co.

Jurors must be unanimous for a guilty verdict on any of the 14 counts of securities fraud and conspiracy.

If convicted, Rajaratnam, 53, could face a prison sentence of up to 25 years.

Rajaratnam's October 2009 arrest was part of an investigation that prosecutors described as the biggest probe of insider trading at hedge funds on record.

PHONE TAPS

The jury spent one hour listening to nine phone taps between the defendant and his brother, fellow Galleon trader Rengan Rajaratnam, and five former friends and associates.

Two of these, former McKinsey partner Anil Kumar and former Intel Corp executive Rajiv Goel, pleaded guilty and were key government trial witnesses against Rajaratnam.

The calls are among more than 40 the jury heard during the trial, now in its eighth week before U.S. District Judge Richard Holwell.

Jurors took notes and read transcripts that were projected onto screens in front of them as the recordings were played.

Rajaratnam, who has been in and out of the courtroom during deliberations, stared straight ahead while jurors listened to the recordings. A few friends and a couple of dozen reporters sat in public benches behind him.

In the broader Galleon case, 21 out of 26 people have pleaded guilty. Sri Lankan-born Rajaratnam is the only defendant to go on trial so far.

The attention given to the case is reminiscent of the big insider-trading scandal of the mid-1980s involving speculator Ivan Boesky and junk bond financier Michael Milken.

Many defendants were recorded on court-approved phone taps, traditionally used to probe organized crime families, political corruption and drug trafficking.

Rajaratnam, Drimal and other defendants failed in their bids before separate judges to have wiretap evidence excluded on privacy and other grounds.

Drimal, 54, told U.S. District Judge Richard Sullivan he traded in shares of computer network equipment maker 3Com Corp and Canadian drug company Axcan Pharma Inc, based on tips from lawyers working on merger transactions. Prosecutors said these trades led to more than $6.4 million of illegal profit.

At the time I did these trades, I believed my conduct was illegal and wrong, and I deeply regret these actions that have caused such pain for my family and friends, Drimal said.

Drimal had been scheduled to go on trial with three others on May 16. He is free on bail until sentencing on September 9. The government has suggested a prison term of up to seven years.

His lawyer, JaneAnne Murray, declined to comment.

The cases are USA v Raj Rajaratnam et al, U.S. District Court, Southern District of New York, No. 09-01184; and USA v Goffer et al in the same court, No. 10-00056.

(Reporting by Grant McCool, Jonathan Stempel and Basil Katz; Editing by Tim Dobbyn, Gerald E. McCormick and Ted Kerr)

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