Defense attorneys in several of the federal criminal trials involving traders at the Galleon Group hedge fund have challenged the admissibility of wiretapping evidence obtained by the FBI. Founder Raj Rajaratnam, trader Craig Drimal, and 13 other Wall Street traders have been charged with insider trading that allegedly netted them approximately $60 million in illegal profits.

The federal criminal defense lawyers have moved to suppress the evidence on the grounds that it was obtained illegally. While none of those motions has been successful so far, they are expected to lead to numerous federal appeals — and open the government to some uncomfortable legal challenges.

The FBI apparently netted some useful evidence, but they may also have broken the law. In an evidentiary hearing in the Drimal case last week, a federal judge rebuked the FBI for illegally violating Mr. Drimal’s privacy by taping “intensely personal” phone calls between him and his wife.

“I don’t think that there was any question that at least a couple of the calls here were disgraceful and should not have been monitored the way they were,” said Judge Richard Sullivan of the U.S. District Court for the Southern District of New York.

“It is an embarrassment to the FBI. It is an embarrassment generally. It should not happen.”

Despite judge’s finding that the FBI broke the law, wiretap evidence unlikely to be suppressed at trial

In the Rajaratnam case last year, defense lawyers moved to suppress the evidence on the grounds that the FBI had not been truthful on its application for the wiretap. The judge in that case found that key facts had been left out on the application — but that they were not serious enough to suppress the evidence.

Judge Sullivan himself denied a previous motion by Drimal and four co-defendants to suppress the taped phone conversations on other grounds.

In this case, however, it appears that the FBI may have broken a specific federal law when it listened in to calls between the trader and his wife, who was not suspected of any crime.

According to Drimal’s attorney, under Title III of the Omnibus Crime Control and Safe Streets Act, also known as the Federal Wiretap Act, the FBI has a legal obligation to stop listening to a call once it becomes clear that it is unrelated to the investigation. Failing to do so may have violated the Drimals’ constitutional right to be free from unreasonable search and seizure.

Some of the phone calls the FBI recorded between Drimal and his wife were “of an intensely personal nature that are particularly painful for the Drimals to know have been overheard,” Drimal’s lawyer wrote in her motion.

After participants listened to one of the calls on headphones, Judge Sullivan asked FBI Special Agent Frank Lomonaco whether he thought investigators had acted appropriately when they listened to a “call of that nature for that length of time.”

“Knowing what I know now, no,” he answered.

Nevertheless, Sullivan cautioned Drimal’s lawyer that he might not grant the motion to suppress.

“In fact, the case law suggests that suppression is a pretty hard remedy to get these days — or ever,” he said.

Rajaratnam’s attorneys have said they plan to file a federal appeal on the issue should he be convicted.

Source: Reuters Legal, “White-collar wiretaps can lead to legal challenges,” Andrew Longstreth, March 17, 2011