In a letter to lawyers for Rajaratnam, the Galleon Group LP co-founder who goes on trial next month for insider trading, U.S. prosecutors said the Morgan Stanley banker in May 2006 gave the information to an unnamed person who passed the tip on to Rajaratnam.
A public copy of the letter contains redactions obscuring the identities of the Morgan Stanley banker and the person who allegedly passed Rajaratnam the tip.
“In or about May 2006, [redacted], a banker with Morgan Stanley, provided [redacted] with information regarding AMD’s acquisition of ATI,” said the letter, signed by Assistant U.S. Attorney Jonathan Streeter. “[Redacted] provided this information to Rajaratnam.”
Prosecutors filed a superseding indictment against Rajaratnam yesterday. Morgan Stanley has put the banker on leave.
“We have placed the banker on leave and are fully cooperating with the government’s investigation,” said Pen Pendleton, a spokesman for New York-based Morgan Stanley. Pendleton declined to identify the banker or say when he was put on leave.
“We believe we are the victim of an insider trading scheme, AMD spokesman Mike Silverman said in an e-mail today. “We have been cooperating with the U.S. attorney’s office and will continue to do so. Beyond that, we have no comment.”
The letter was filed as an attachment to papers filed by Rajaratnam asking U.S. District Judge Richard Holwell, who is presiding over Rajaratnam’s criminal case, to block a document subpoena prosecutors are trying to issue to Galleon Management LP. Prosecutors on January 13 asked Holwell for permission to serve the subpoena, according to Rajaratnam’s motion.
Morgan Stanley isn’t the only Wall Street bank to be drawn into the Rajaratnam case. As of April, Rajat Gupta, then a member of the Goldman Sachs Group Inc. board, was under examination by the U.S. Securities and Exchange Commission as part of the case, according to a person familiar with the Galleon investigation who asked not to identified.
Gupta has not been accused of wrongdoing. His lawyer, Gary Naftalis, has said that Gupta’s “record of ethical conduct” is “beyond reproach.” Naftalis didn’t immediately respond to an e- mail request for comment today.
Dozens of Companies
Today’s court filing and earlier ones list dozens of companies that Rajaratnam is alleged to have traded illegally.
When Rajaratnam was arrested on Oct. 16, 2009, prosecutors cited trades in Google Inc., Polycom Inc., Hilton Hotels Corp., Advanced Micro Devices Inc., Akamai Technologies Inc., Clearwire Corp. and PeopleSupport Inc. A Dec. 15, 2009 indictment added two more: Marvell Technology Group Ltd. and Atheros Communications Inc.
A superseding indictment on Feb. 9, 2010 increased the number of stocks to 12, with the addition of ATI Technologies Inc. eBay Inc., and Intel Corp.
Beginning on March 22, prosecutors said in letters to John Dowd, a lawyer for Rajaratnam, that they had evidence about 21 more stocks. Those include Goldman Sachs Group Inc., Cisco Systems Inc. AT&T Inc., Clear Channel Corp., NetLogic Microsystems Inc., International Business Machines Corp., @Road Inc., Integrated Circuit Systems Inc., PF Chang’s China Bistro Inc., Spansion Inc., Xilinx Inc., Broadcom Corp., Nvidia Corp., and others.
Beginning on Dec. 2, prosecutors added Procter & Gamble Co. and The JM Smucker Co. to the list, according to Dowd’s filing today, which also cites Intersil Corp. and CA Inc.
Other stocks cited in court papers include Cavium Networks Inc., Garmin Ltd, MEMC Electronic Materials Inc., Synaptics Inc., Nuance Communications Inc. and Business Objects SA. The court filing today also indicates that prosecutors know the identities of others who allegedly leaked tips. The names are redacted in the public court filing. In addition to the Morgan Stanley banker, it cites employees at Intersil, Nvidia, and Intel. Prosecutors also say they’re aware of the source of leaks about Vishay Intertechnology Inc.
In his filing, Dowd says prosecutors in April sought documents “about two Galleon employees” allegedly involved in schemes to swap illegal tips about Xilinx, Spansion and @Road. He doesn’t identify those employees or say whether prosecutors were referring to other Galleon employees previously charged.
The billionaire Rajaratnam is the central figure in a three-year probe in which more than 20 people have been criminally charged.
The case is the first in which prosecutors and the Federal Bureau of Investigation have made extensive use of the phone tapping techniques used to battle organized crime against significant Wall Street insider-trading scheme.
The Sri Lankan-born Rajaratnam, who has pleaded not guilty, is accused of making more than $40 million in illegal schemes dating back to 2003. Both he and his co-defendant Danielle Chiesi were accused of profiting from tips provided by company executives, hedge-fund employees and other insiders.
He is scheduled to go to trial Feb. 28. Other stocks cited in court papers include Cavium Networks Inc., Garmin Ltd, MEMC Electronic Materials Inc., Synaptics Inc., Nuance Communications Inc. and Business Objects SA.
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