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By SUSAN PULLIAM And CHAD BRAY

Raj Rajaratnam privately told colleagues after being arrested in October 2009 on insider-trading charges that the government “would never meet a meaner b—d.”

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Bloomberg News

Raj Rajaratnam

The hedge-fund titan, founder of the Galleon Group, quickly hired a lawyer with a track record of going for the jugular: John Dowd.

On Tuesday, Mr. Rajaratnam and his lawyer will get their showdown, in a jury trial that will be among the most closely followed in Wall Street history.

Mr. Rajaratnam told people close to him after his arrest that he intends to testify on his own behalf. Such a strategy is a relatively rare in white-collar criminal cases because of the risk of a slip-up during cross-examination by prosecutors.

With a net worth exceeding $1 billion, Mr. Rajaratnam is the rare defendant wealthy enough to take on the government. His legal bill by trial’s end could reach $40 million, people familiar with the matter estimate, including the tab for a nine-member team from Akin Gump Strauss Hauer Feld LLP assembled by Mr. Dowd. He is a partner and co-head of white-collar defense there.

Galleon’s Web

Criminal complaints and developing disclosures in the Galleon insider trading case allege a far-reaching and complex scheme. Here, the known and alleged relationships.

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In late January, prosecutors contacted Mr. Dowd to explore whether Mr. Rajaratnam was interested in negotiating a plea agreement, people familiar with the matter say. Mr. Rajaratnam quickly brushed aside the overture, so a specific potential deal never was discussed, they say.

Mr. Rajaratnam, raised in Sri Lanka, has told associates he is confident he will win. For months, he has gathered trading data and other material to help Mr. Dowd build his case.

Mr. Rajaratnam was inspired, according to a person who knows him, by an early call of support from entrepreneur Mark Cuban, who himself is battling the U.S. in a civil insider-trading case. Mr. Cuban says he told Mr. Rajaratnam: “Just because the government says something doesn’t make it true.”

Mr. Dowd has pursued a defense strategy that is combative, even by the rough-and-tumble standards of large criminal trials. In May, for instance, he accused prosecutors of lying in their attempt to use wiretaps in the case. A judge disagreed.

The Galleon saga is the largest insider-trading case in a generation.

It involves a cast of technology executives and other hedge-fund traders that the U.S. has alleged is a symbol of a culture of insider trading in the financial markets. Nineteen of 26 defendants have pleaded guilty in an investigation marked by the government’s extensive use of wiretaps, including about 90 hours of calls involving Mr. Rajaratnam that could be used at trial.

If the 53-year-old defendant is found guilty on the 14 counts of securities fraud and conspiracy he faces, he could spend more than 20 years in prison. If the government loses, that will be a major blow to its heavy focus on insider-trading cases—and make it more difficult to pursue future cases at trial.

Key to Mr. Rajaratnam’s defense will be the argument that the data he received didn’t constitute inside information—and that he wouldn’t have known if it did, according to court filings. Mr. Dowd will also attack the credibility of the government’s witnesses, people familiar with his strategy say.

Behind Mr. Rajaratnam’s fighting stance is Mr. Dowd, a 69-year-old former military lawyer known for being willing to mix it up with legal foes. “He has a Marine’s view of combat and takes it to court with him,” says Washington lawyer James Sharp, a longtime friend.

The son of a retail executive in Boston, Mr. Dowd is a Red Sox fan who tools around the harbor at Chatham, Mass., in his 26-foot fishing boat and sometimes entertains relatives by rubbing lobsters on the back of their shells to put them to sleep, colleagues say.

Mr. Dowd showed his skill in picking apart evidence to help his client when he represented Sen. John McCain (R., Ariz.) two decades ago in the “Keating Five” scandal; five senators were accused of corruption in their dealings with Charles Keating, chairman of the Lincoln Savings and Loan Association, which collapsed in 1989.

Mr. McCain—who was reprimanded by the Senate committee for “exercising poor judgment,” but never charged—declined to comment.

Mr. Dowd was hired by baseball in 1989 to investigate charges that batting star Pete Rose had gambled on games when he was manager of the Cincinnati Reds. Mr. Dowd’s investigation subjected him to heavy public criticism from Mr. Rose and his legions of fans. In a report, Mr. Dowd said Mr. Rose bet on dozens of games. Mr. Rose voluntarily agreed to a ban from baseball. He wasn’t charged. Mr. Rose didn’t return calls for comment.

Mr. Dowd’s last major criminal trial was in 1997, when he defended Arizona Gov. J. Fife Symington against bank-fraud charges.

In that case, Mr. Dowd at times shouted at prosecutors, a person close to the situation said, and lost his cool during a pretrial meeting when a prosecutor suggested that a slide Mr. Dowd wanted to use in his opening argument might not be permissible. A spokesman for Mr. Dowd denied that.

“John does not broach disagreement kindly,” said David Schindler, one of the prosecutors on the case. Mr. Symington was convicted at trial but later pardoned by President Bill Clinton.

Mr. Dowd attempted to persuade the judge overseeing the Galleon case to throw out evidence the government gained through wiretaps of Mr. Rajaratnam’s phones, asserting that the government left out details about a cooperating witness’s history and behaved dishonestly when applying to a magistrate judge for the wiretaps.

“They gamed the system,” Mr. Dowd said in a filing.

Mr. Dowd lost that argument in November when U.S. District Judge Richard Holwell, who is overseeing the case, allowed the recordings to be admitted as evidence. He criticized the government, however, for “glaring” omissions in its applications.

At trial, Mr. Dowd will argue that Mr. Rajaratnam’s activities at Galleon involved legitimate stock research.

In proposed instructions for the jury, Mr. Dowd said, “The law does not place professional investment advisers like Mr. Rajaratnam at their peril simply because they seek to obtain information about the companies they invest in on behalf of their clients.” He also argued that the law allows investment advisers to speak with corporate insiders to obtain information.

—James Oberman contributed to this article.

Write to Susan Pulliam at susan.pulliam@wsj.com and Chad Bray at chad.bray@dowjones.com

By THOMAS CATAN

The Justice Department is investigating whether a group representing some top technology firms is unfairly trying to smother a free rival technology for delivering online video that is backed by Google Inc., according to people familiar with the matter.

Much the way firms battled in the 1980s over VHS and Betamax video formats, tech rivals are fighting over the technology used to deliver and display Web video. Currently, video-streaming services like Netflix Inc. and Google’s YouTube pay patent royalties, as do makers of Blu-ray disc players and other hardware.

These firms pay royalties to an organization called MPEG LA, which is the target of the formal antitrust probe, the people familiar with the matter said. MPEG has amassed pools of patents covering widely used video formats and collects royalties for its members, which include Apple Inc. and Microsoft Corp.

Antitrust enforcers are investigating whether MPEG LA, or its members, are trying to cripple an alternative format called VP8 that Google released last year—by creating legal uncertainty over whether users might violate patents by employing that technology, these people added.

The probe, which pits Google and open-source software advocates against some technology giants like Apple, could help determine whether anyone will own rights over the creation and broadcast of online video in the next major Web programming language, called HTML 5.

At stake is “who is going to have competitive clout in the world after television,” said Eben Moglin, a Columbia University professor who supports free and open software.

The California State Attorney General’s office is also investigating the matter, according to people familiar with the matter.

MPEG LA didn’t confirm or deny it is under investigation. But the group says it isn’t acting to kill a competitor. It said it’s simply offering a service for patent holders and is agnostic about which video format prevails.

“We are effectively a convenience store” for licensing patents, said Larry Horn, MPEG LA’s chief executive. “We have no dog in that fight.”

Representatives of both law enforcement agencies as well as Apple and Google declined to comment. Microsoft didn’t respond to a request for comment.

MPEG LA, which was formed in the late 1990s,manages the licensing of more than 1,700 patents used in a high-definition video encoding standard known as H.264. The Justice Department is concerned the group’s actions may stifle competition to that dominant format, the people familiar with the matter said.

Google has been offering an alternative. The Silicon Valley giant last year paid $125 million to buy a company that developed the video-compression format called VP8. Google later released it as a royalty-free standard under an open license that enables software developers to use it any way they wish.

At present, no patent royalties are charged for using Google’s VP8 format. But MPEG LA has questioned that status, and last month issued a call for companies to submit patents they believe may be infringed by VP8. “I can tell you: VP8 is not patent-free,” Mr. Horn said. “It’s simply nonsense.”

For some people in the tech industry, the issue is less about cost and more about competition and control over technologies at the heart of the Internet. “How could it come to pass that it’s illegal to compete?” asked Monty Montgomery, who runs a free software foundation, XIPH.org, and supports VP8. “That’s when everybody’s antitrust bells should be going off.”

The threat of future lawsuits has helped persuade some companies to forsake VP8. Apple’s chief executive, Steve Jobs, explained in an email to the Free Software Foundation last year that a patent pool was assembled to “go after” a previous open-source format.

“All video codecs are covered by patents,” Mr. Jobs wrote. “Unfortunately, just because something is open-source, it doesn’t mean or guarantee that it doesn’t infringe on others patents.”

Write to Thomas Catan at thomas.catan@wsj.com

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