Inside Trader Roomy Khan Testifies in Doug Whitman Trial
Roomy Khan, a key government informant who twice pleaded guilty to passing inside information to Galleon Group fund manager Raj Rajaratnam, took the stand as a witness in the trial of Whitman Capital LLC’s Doug Whitman.
Under questioning today by Assistant U.S. Attorney Christopher LaVigne in federal court in Manhattan, Khan told jurors she traded on inside information and passed tips to friends including Whitman, her former neighbor.
Prosecutors in Whitman’s insider-trading trial claim he got non-public information about Google Inc. and Polycom Inc. (PLCM) from Khan, a former Intel Corp. (INTC) executive. Whitman made almost $1 million for his hedge fund from trading on illegal tips from Khan and others, prosecutors allege.
Khan, who pleaded guilty to passing confidential company information in 2001 and 2009, played a crucial role in the government’s probe of insider trading at hedge funds. Evidence she provided helped prosecutors get authorization from a judge to wiretap Rajaratnam’s mobile phone.
Khan testified for 40 minutes at the day’s end, describing a history of passing tips and trading on inside information that began with giving Rajaratnam Intel revenue figures when she was an executive at Intel in 1997.
Khan, who said she met Rajaratnam when he was a senior analyst for Needham & Co., a New York-based investment bank, told jurors she contacted him when she became “disenchanted” with her work at Intel and wanted a Wall Street job. Rajaratnam told her he would hire her when Galleon opened a California office. She said she started providing him with non-public Intel revenue figures.
“He said to me ‘How’s business?’” Khan testified. “I wanted to please him and I offered him the information.”
Khan testified she gave Rajaratnam Intel’s weekly “book- to-bill” report, which contained orders and billing information from the chipmakers’ top 20 customers.
“I was seeing approximately 80 percent of Intel’s revenue” in the report, Khan said. “And from that you could extrapolate Intel’s total revenue. So that is very powerful information.”
Khan was later charged criminally and pleaded guilty to wire fraud for leaking the Intel information. She served six months home confinement and 3 years of probation, she told jurors.
Rajaratnam was found guilty in May 2011 of all 14 criminal counts against him. He’s serving an 11-year sentence in a Massachusetts federal prison and is appealing his conviction.
Today’s appearance by Khan marked the first time she has testified at trial as a witness for the government. She wasn’t called to testify in Rajaratnam’s trial in New York federal court last year.
Khan, who pleaded guilty separately in 2009 to securities fraud, conspiracy and obstruction of justice, faces as many as 30 years in prison when she’s sentenced, she told jurors.
Whitman denies the charges against him.
In an opening statement in the trial, David Anderson, one of his lawyers, told jurors that Khan and two other cooperating witnesses testifying, Karl Motey and Wesley Wang, are lying to avoid prison for their own admitted crimes.
Motey, an independent consultant hired by Whitman, testified last week that he passed Whitman inside information from two employees of Marvell Technology Group Ltd. (MRVL) Prosecutors have said the jury will hear from Wang, a Whitman friend and consultant who said in his guilty plea said he passed tips about Cisco Systems Inc. (CSCO), Polycom and Marvell.
Khan told jurors Rajaratnam “was very friendly” when she first called him at Needham, a New York-based investment bank that specialized in technology and health-care companies where he was a senior analyst. She said she was calling industry analysts at the time to research Advanced Micro Devices Inc., an Intel competitor.
Rajaratnam later hired her to work for Galleon in Santa Clara, California. She left the hedge fund “on very good terms” in 1999, walking away with more than $40 million from trading in Internet stocks for her own account, she said.
By 2005, she’d lost much of that money and her finances “were fairly bad,” Khan told jurors. She got a job working for Trivium Capital Management LLC, where she again traded on inside tips and passed information to friends, she said.
Khan is scheduled to continue testifying tomorrow. She may be on the witness stand for two days, lawyers for both sides told U.S. District Judge Jed S. Rakoff, who is overseeing the trial.
The case is U.S. v. Whitman, 12-cr-00125, U.S. District Court, Southern District of New York (Manhattan).
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