The insider trading conviction of billionaire investor Raj Rajaratnam on Wednesday has been ringing alarm bells all over Wall Street, but the case is also sending a powerful message to prosecutors: Use more wiretaps to build business fraud cases.

Until recently, investigators who put together criminal cases over insider trading and securities fraud followed a traditional approach.

“And that meant doing it the old-fashioned way, which is through lots of documents and lots of interviews of witnesses,” said Andrew Weissmann, who investigated the downfall of Enron and led the task force that brought those executives to justice.

Weissmann said Wednesday’s verdict in the big insider trading case has shined a light on the use of wiretaps. Secret recordings in the case let jurors listen in on how some people on Wall Street really operate.

“Nothing is more direct than listening to somebody, in his own words, incriminate himself and make it clear he knew exactly what he was doing,” said Harvey Pitt, a lawyer who has represented banks and bankers for decades.

‘Pillow Talk’ Goes Public

Whispered conversations the government played for the jury helped prosecutors demonstrate Rajaratnam’s intent to break the law.

“Pillow talk is supposed to be private, and when you make it public like this, you get these kinds of results,” Pitt said, referring to the almost half-dozen guilty pleas from Rajaratnam’s associates and his conviction Wednesday on 14 criminal charges.

In speeches to business groups, the U.S. Attorney in New York who oversaw the case, Preet Bharara, has warned that prosecutors will leave no stone unturned in investigating corporate fraud.

That means, he said, more wiretaps — once used only in drug and mob cases.

Getting permission to snoop on phone calls requires several layers of review — and sometimes help from a snitch or a whistleblower.

“The hard part traditionally has been getting it up through the Department of Justice,” said Sol Wisenberg, a former federal prosecutor. “It’s got to go all the way up through very high layers in the Department of Justice, and typically this has not been done in white-collar cases.”

But senior Justice Department officials, including the chief of the criminal division, have been encouraging prosecutors to explore more aggressive strategies ever since the insider trading scandal came to light.

Pitfalls And Benefits

There’s another hurdle: convincing a federal judge to approve the wiretap. Prosecutors have to demonstrate two big things to the judge.

“If you can show first that there was no other reasonably available means of securing the evidence, and two, that you’re making a minimally invasive use of them,” John Coffee, a law professor at Columbia University, said.

He says there’s another complication with wiretaps: “You have to understand the one great limitation of tapes. They are extraordinarily expensive. You have to have someone monitoring those tapes 24 hours a day.”

Investigators must stop recording when talk turns from stock trades to personal conversations between husband and wife.

But the lesson of the Rajaratnam verdict may be that the benefits of wiretaps far outweigh the complications along the way — especially in major prosecutions.

Rajaratnam’s lawyer says they’ll appeal the jury verdict — and the only real issue on appeal will be the legality of those government wiretaps. Copyright 2011 National Public Radio. To see more, visit http://www.npr.org/.