New Trend Admitting Wiretap Evidence in Insider Trading Cases

Until recently, the use of wiretap evidence was limited to the prosecution of crimes that are specifically enumerated in Title III of the Omnibus Crime Control and Safe Streets Act of 1968, codified at 18 U.S.C. 2510-2522. Such evidence has typically been admitted primarily in drug cartel, alien smuggling and organized crime cases, but until now it has not been used in securities fraud cases. The times have changed. In the last several months, federal courts have twice upheld the use of wiretap evidence in insider trading prosecutions. Defendants Raj Rajaratnam and other ex-Galleon Group traders were found guilty of securities fraud by juries that listened spellbound to damning evidence from wiretapped telephone calls. Although the use of wiretap evidence is still generally prohibited in insider trading and other cases not enumerated in Title III, these recent rulings suggest that the reliance on wiretap evidence may be allowed in any case in which the wiretap was authorized in the investigation of an enumerated crime, even if that crime is not itself prosecuted.

Wiretaps and Congressional Goals

Congress’ intent in passing Title III was to strike a balance between allowing wiretapping as an investigative tool and safeguarding the privacy of the general public and investigative targets. Wiretapping is one of the most invasive tools in law enforcement’s arsenal, and Title III reflects a strong Congressional desire to circumscribe its use. See, e.g., Berger v. New York, 388 U.S. 41, 63 (1967) (“Few threats to liberty exist which are greater than that posed by the use of eavesdropping devices.”); Gelbard v. United States, 408 U.S. 41, 48 (1972) (quoting S. Rep. No. 1097, 90th Cong., 2d Sess., 66 (1968)); U.S. Code Cong. & Admin. News, p. 2153 (“To assure the privacy of oral and wire communications, [T]itle III prohibits all wiretapping and electronic surveillance by persons other than duly authorized law enforcement officers engaged in the investigation or prevention of specified types of serious crimes, and only after authorization of a court order obtained after a showing and finding of probable cause.”) (emphasis added). Accordingly, Title III enumerates the only types of predicate offenses upon which law enforcement may rely in seeking authorization for a wiretap.

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