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Will Dowd's Reputation Rise Above the Angry Bird?

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You learn as a child to never be a sore loser. Well, I guess Raj Rajaratnam's attorney John Dowd missed that lesson.

Giving the angry bird to a CNBC cameraman, the flip off was seen over and over again both on national television as well as the Internet.

Losing his cool just shows you no matter how big and important you think you are, you can still be an emotional baby. I can see why Dowd would be upset, his name is now etched in stone as the defense attorney whose client's guilty verdict made it one of the highest profile convictions since the days of Enron and WorldCom.

I asked long-time legal contact Jacob Frenkel about Dowd's media misstep. I've been calling on Frenkel since the days of Enron. He's a former SEC attorney, federal prosecutor and a partner at Shulman Rogers.

LL: What do you think of his conduct?

JF: When lawyers are in front of the camera, they represent their client and the entire profession. Unfortunately, some responses in the heat of the moment and after a long unsuccessful trial prove regrettable, in retrospect. The media did its job seeking comment, better to express disappointment and maintain professionalism or not speak at all. The fact remains, Mr. Dowd is an outstanding, skilled and accomplished trial lawyer, and that reputation survives this verdict.

LL: Does this unprofessional demeanor will have any impact on Raj appeal?

JF: This will have no effect whatsoever on the post-trial motions, sentencing or appeal.

LL: Do you anticipate a counsel change?

JF: Often we see a change of counsel at the appeals stage. Defendants who can afford specialized appellate counsel, particularly after such an expensive trial, look for counsel who are known and have a track record of success in that particular appellate court. Ultimately, the appeal will turn on the legal rulings made by the trial court Judge, and the appeal will be difficult. This was a case to win or lose at trial.

LL: The Rajarantnam case is all about the discussion of what is the very grey line of getting very good information and illegal non-public information.

JF: The SEC has said unequivocally that the "mosaic theory" survives.

This case has been from the beginning about identifying the line and crossing the line, with a jury making that decision.

LL: What message does this guilty verdict send to Wall Street?

JF: The message to Wall Street is no high profile figure—no icon—is untouchable. Where the conviction likely makes a difference is in deciding whether the Government will pull the trigger on other investigations and potential cases in the pipeline. The guilty verdict also sends multiple messages. For institutions of all size on Wall Street, the most important message is compliance.

The activities of one principal in a firm can bring it down. There must be a revisiting of the comprehensiveness and effectiveness of compliance and training programs at all levels of organizations. Institutions that do not step up compliance efforts put themselves at risk. And, there must be heightened sensitivity to the building of the file that is the basis for investment decisions.

For senior executives, the message is that noone is untouchable, and the Government will pursue aggressively conduct it believes to violate the law. And, for those who took comfort in the Bear Stearns hedge fund and recent insider trading acquittals, the Government still is prepared to pursue cases. Most important, this case represented allegations of classic insider trading, which has been around for decades. Clearly, after this verdict, we will see many more cases through investigations employing aggressive surveillance techniques.

LL: What did you think about the prosecutions case? Clearly the tapes were very important and it was a new use of wire tapes. To hear Rajarantnam in real time was amazing to say the least.

JF: The only reason the Government could bring and win this case was the wiretaps. The most powerful evidence is a defendant's own words.

I believe that if the only evidence were circumstantial, that is timing of trades and witness testimony, we never would have seen an indictment, only a civil SEC case.

LL: You had 26 original defendents, 21 have pleaded guilty. More than 100 wire tapped conversations. Rajarantnam's defense needless to say did not have the wind at their back.

JF: Nevertheless, the Rajaratnam defense pulled out every stop and mounted the best possible defense against challenging facts. Even if Rajaratname did not testify, the jury heard him implicate himself.

The monumental task for the defense was to expand the umbrella as far as possible in its suggestion of what information was not material and was already public. In the end, the well-funded and strategized defense simply could not overcome the weight of the evidence, as interpreted by the jury.

As a result, in the cases to come, and even those pending, defendants will weigh carefully whether the risks of going trial outweigh the certainty, even with the unpleasant prospect of jail, of a plea.

LL: When it comes to sentencing, do you think he'll serve the full time from all the counts?

JF: Under the federal sentencing guidelines, a defendant essentially serves 85 percent of his time. If Mr. Rajaratnam wants to tell the Government about people with whom he spoke, people whom he may have tipped, the Government will listen. But, absent a motion from the Government to reduce the length of the sentence for post-conviction cooperation, he will be spending well over a decade in jail.

LL: Do you like the federal sentencing guidelines?

JF: The federal sentencing guidelines have distorted criminal practice. Although they are supposed to be guidelines and the Supreme Court has said so, federal judges still are wedded overwhelmingly to the guidelines. There are many people in jail for white-collar offenses who do not belong there.

The decision about sentencing really should be within the exclusive domain of the Judge, not a probation officer applying the guidelines for a Judge. Running to Congress and the Sentencing Commission to keep ratcheting up white-collar penalties serves no deterrent effect. To be clear, I am not saying that certain white-collar offenders do not belong in jail; they do. But the application of the Guidelines results in many going to jail who do not belong there.

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A Senior Talent Producer at CNBC, and author of "Thriving in the New Economy:Lessons from Today's Top Business Minds."