The jury in the closely watched insider trading trial of hedge fund manager Raj Rajaratnam reheard on Monday a dozen FBI phone taps centered on one transaction in the charges against the Galleon Group founder.

The jury ended the day without reaching a verdict in the Manhattan federal court trial of the central figure in what U.S. prosecutors have called the biggest-ever probe of insider trading at hedge funds.

While the jurors began their third week of deliberations, final preparations were made for a separate trial of three defendants to hear as many as 100 secretly recorded conversations, also part of the government's sweeping insider trading probe.

The three defendants -- whose trial starts on May 16 with jury selection four floors above the courtroom where Rajaratnam has been on trial since March 8 -- are former Galleon trader Zvi Goffer, who founded Incremental Capital, and two other former Incremental traders, Zvi's brother, Emanuel Goffer, and Michael Kimelman.

Prosecutors told presiding U.S. District Judge Richard Sullivan they would try to reduce the number of calls played to 60. The jury in the Rajaratnam trial before Judge Richard Holwell heard 46 telephone taps at the heart of the government's case.

Sri Lankan-born Rajaratnam, 53, is the only defendant out of 26 defendants to go on trial so far in the broad Galleon case. Twenty-one have pleaded guilty. One is at large.

Rajaratnam is accused of making an illicit $63.8 million between 2003 and March 2009 in trades involving more than a dozen stocks. Rajaratnam faces up to 25 years in prison if he is convicted on conspiracy and securities fraud charges.

CLEARWIRE TRANSACTION

The jury listened intently to 12 phone taps they had either previously heard in the evidence phase of the trial or during deliberations. Some were replayed on Monday for the benefit of an alternate juror who replaced a sick juror on May 4.

All but one of the calls were between Rajaratnam and former Intel Corp executive Rajiv Goel.

Reporters who caught a glimpse inside the jury room when the jurors filed into the courtroom to listen to the tapes, saw a large wooden table strewn with papers, binders, notebooks and water bottles. Rajaratnam, who missed three days of court last week to treat an infection in his right foot, sat with his lawyers and looked straight ahead.

Goel pleaded guilty to criminal charges and testified against his former friend Rajaratnam. The men were accused of conspiring to get advance word on a wireless network venture announced in May 2008 between Clearwire Corp and Sprint Nextel Corp with an investment by Intel.

Rajaratnam's lawyers argued the information was already public, that it had been discussed in analysts' reports and Goel had no inside information to provide. During cross-examination and closing statements, defense lawyers said Goel lied to try to get a lighter prison term.

The Clearwire transaction is in the third, sixth and seventh counts of the 14-count indictment. The charges involve mostly technology stocks, but also include one that Rajaratnam was tipped on Goldman Sachs Group Inc by Rajat Gupta, a former director at Wall Street's most influential bank.

The cases are USA v Raj Rajaratnam et al, No. 09-01184 and USA v. Goffer et al No. 10-0056, U.S. District Court for the Southern District of New York.

(Reporting by Grant McCool and Basil Katz; editing by Dave Zimmerman and Andre Grenon)

Phone