Court listens to share deal in insider trading case

The jurors who will decide the fate of hedge-fund giant Raj Rajaratnam heard the voice of the Galleon founder for the first time yesterday on wiretapped recordings that prosecutors say reveal him receiving illegal insider-share tips.

US authorities listened in on Rajaratnam's conversations for more than eight months in 2008, and a Manhattan courtroom yesterday heard one conversation between him and a high-ranking friend at the consulting firm McKinsey & Co, in which the pair discussed a soon-to-be announced fundraising deal involving the chipmaker Advanced Micro Devices.

"Hi. So yesterday they agreed on, at least they've shaken hands and they've said they are going ahead with the deal," former McKinsey executive Anil Kumar said in the call on August 15, 2008. The call refers to an impending investment in AMD by Abu Dhabi's sovereign wealth fund.

Rajaratnam is heard asking: "Right. What's the deal? How much are they investing?" In the call, Kumar says "there will be such a boost from this announcement, it'll be fine", and "you can go ahead and buy".

Rajaratnam faces up to 20 years in jail if convicted on charges of insider trading and securities fraud. The Sri Lankan-born investor is alleged to have made US$45 million ($61 million) in profits from illegal trades.

Once one of the most powerful hedge-fund managers on Wall St, he is accused of boosting his investment returns thanks to a network of well-placed insiders who gave him illegal tips about forthcoming deals. His arrest in October 2009 sent shock waves through the financial community, and signalled the US authorities' determination to root out and punish insider trading. Nineteen people in Galleon's alleged network of illegal tipsters and traders have already pleaded guilty. Rajaratnam says he is innocent, and Galleon's trades were based on a "mosaic" of information all derived from legitimate sources.

Kumar, who has pleaded guilty on two charges, agreed to testify for the prosecution. On the stand yesterday, on the first day of evidence, was the FBI officer Diane Wehner, who described the mobile telephone surveillance of Rajaratnam, Kumar, the former Intel executive Rajiv Goel and others who will testify at the trial.

Wehner said she became familiar with Rajaratnam's voice "through multiple overhears during eight or nine months the wiretap was up".

The trial is expected to last about two months. Assistant US Attorney Jonathan Streeter claimed that Rajaratnam, "knew tomorrow's business news today" because he "exploited a corrupt network of people" to find "information that ordinary people didn't have".

John Dowd, for the defence, said that many of the prosecution witnesses were people under threat of long jail terms, who were testifying against Rajaratnam "to save their own skins".

"There is a real-world context in which law-abiding professionals discuss stocks and trades. In the real world people are discussing stocks. It is legal and it is good for all of us." Independent