Kumar Tells Jurors of Secret Consulting Deal With Rajaratnam

Ex-McKinsey & Co. director Anil Kumar told a jury that Galleon Group LLC co-founder Raj Rajaratnam secretly hired him as a consultant in 2003 for $500,000 to be paid into a Swiss bank account, in violation of McKinsey rules.

Kumar, testifying today at Rajaratnam’s insider-trading trial in New York, said the hedge-fund billionaire pulled him aside after a 2003 charity event and offered to pay Kumar to contact him every four to six weeks.

Kumar declined at first, saying McKinsey didn’t permit outside consulting work.

“If you could get someone on the outside to accept it, then McKinsey doesn’t have to know about it,” Rajaratnam replied, according to Kumar.

Kumar said he found a friend in Europe, whom he didn’t identify, who agreed to sign a consulting agreement with Galleon for $500,000 a year. That entity, called Pecos Trading Co., had a bank account in Switzerland, he said.

Rajaratnam’s payments to Pecos were invested in Galleon’s Buccaneer’s Offshore Ltd. in an account in the name of Kumar’s housekeeper, Manju Das, Kumar said.

Rajaratnam didn’t say at the time that he would require inside information about McKinsey clients, Kumar testified.

“After it was set up, it changed its nature,” Kumar said of the arrangement. He testified earlier that he began providing inside information to Rajaratnam in 2004.

Biggest Crackdown

Rajaratnam, 53, is the central figure in the largest crackdown on hedge-fund insider trading in U.S. history. The Sri Lankan-born money manager is accused of making $45 million from confidential information leaked by corporate insiders and hedge fund traders. His trial started March 8.

Kumar in 1983 obtained a master’s degree in business administration from the Wharton School at the University of Pennsylvania, where he met Rajaratnam.

The former McKinsey director pleaded guilty to leaking tips to Rajaratnam about Advanced Micro Devices Inc. (AMD) deals, including its acquisition of ATI Technologies Inc. in 2006. He also admitted telling Rajaratnam about a deal in which AMD was getting an investment from Mubadala Development Co., an Abu Dhabi government investor.

The case is U.S. v. Rajaratnam, 1:09-cr-01184, U.S. District Court, Southern District of New York Manhattan).

To contact the reporters on this story: David Glovin in Manhattan federal court at glovin@bloomberg.net; Patricia Hurtado in Manhattan federal court at phurtado@bloomberg.net; Bob Van Voris in Manhattan federal court at rvanvoris@bloomberg.net.

To contact the editor responsible for this story: David E. Rovella at drovella@bloomberg.net.

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