Rajaratnam Giggles, Talks of Deals in First Insider Tapes
Galleon Co-Founder Raj Rajaratnam
Peter Foley/Bloomberg
Raj Rajaratnam, the Galleon Group co-founder accused of insider trading, exits federal court on the first day of his trial in New York.
Raj Rajaratnam, the Galleon Group co-founder accused of insider trading, exits federal court on the first day of his trial in New York. Photographer: Peter Foley/Bloomberg
The recorded voice of Galleon Group LLC’s Raj Rajaratnam -- giggling, asking about the stock market, questioning a friend about a public company -- rang out in a federal courtroom as the government began presenting evidence against him in his insider-trading trial.
Prosecutors this morning introduced the first three wiretap recordings of the hedge fund co-founder, who is on trial in federal court for trading on inside information. Diane Wehner, a Federal Bureau of Investigation special agent who was the first government witness, told jurors today how agents made the recordings of Rajaratnam’s cell phone calls in 2008.
“We know because one of our guys is on the board,” Rajaratnam told his friend, Rajiv Goel, during an Oct. 7, 2008, call. The two men are discussing the acquisition of PeopleSupport Inc. and Rajaratnam is telling Goel that he bought 30,000 shares for Goel’s account, according to the tape.
In another conversation played by prosecutors for jurors in the Manhattan courtroom, Rajaratnam asked his friend Anil Kumar, “Should I buy a million?” after Kumar tells him about a transaction involving Advanced Micro Devices Inc. (AMD)
“You cannot go wrong,” Kumar replied. “There will be such a boost from this announcement.”
Market Talk
Rajaratnam is the central figure in the largest investigation of 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. Rajaratnam may spend as long as 20 years in prison if convicted of fraud.
Prosecutors, in their opening statements yesterday, said Rajaratnam used an illegal network of secret sources to earn millions of dollars in illicit profits, while his defense claimed he made decisions based only on publicly available information. The prosecution is relying on wiretaps it made of Rajaratnam’s phone conversations as well as testimony from Rajaratnam’s alleged accomplices.
“How’s the market treating you today?” Rajaratnam asked Galleon trader Adam Smith in another tape played for jurors after they discussed a deal involving Vishay Intertechnology Inc.
“Like a baby treats a diaper,” Smith replied, prompting giggles from Rajaratnam.
‘Snippets’
The recordings were just “snippets” of Rajaratnam talking with two friends and two Galleon traders, said defense attorney Terence Lyman during his cross-examination of Wehner. While questioning of Wehner, Lyman sought to show that the conversations were innocent and not corrupt.
For instance, after prosecutors played a one-minute portion of a taped conversation between Rajaratnam and Smith, the defense attorney highlighted two additional minutes in which another Galleon trader briefed Rajaratnam on the market’s performance and the hedge fund’s holdings that day.
In the Goel conversation about PeopleSupport, Lyman sought to show that Rajaratnam was buying stocks for his longtime friend and complaining that the brokerage he used had overcharged Goel.
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 New York at dglovin@bloomberg.net; Patricia Hurtado in New York at pathurtado@bloomberg.net; Bob Van Voris in New York at rvanvoris@bloomberg.net
To contact the editor responsible for this story: David E. Rovella at drovella@bloomberg.net
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