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FBI Informant Khan Cries on Stand While Admitting Lies

Roomy Khan, who began meeting with the FBI almost five years ago as agents probed Galleon Group LLC co-founder Raj Rajaratnam, broke down in tears as she testified about the many lies she told investigators.

“This has been very difficult for me, and I understand that I lied a number of times,” she said yesterday, crying, during the insider-trading trial of Whitman Capital LLC founder Doug Whitman. “I realize many decisions I made were really wrong.”

Khan is one of three key government witnesses in Whitman’s trial and has told jurors she passed him illegal tips on Google Inc. (GOOG) and Polycom Inc. (PLCM) On cross-examination, Khan admitted she lied to federal agents, destroyed evidence and tried to warn some of her contacts that she had been questioned about illegal trades. She said she even acquired a cell phone in her gardener’s name to hide her actions.

“I think I had been lying to the government about a lot of things and I was just scared to use my own phone,” Khan said.

Khan, who pleaded guilty to a second set of insider trading charges in 2009, faces as long as 30 years in prison when she’s sentenced. She is testifying for prosecutors in a bid for leniency and was on the witness stand for a third day in the trial of Whitman, her former Atherton, California, neighbor.

Prosecutors accuse Whitman of trading on information from sources including Khan, who passed him illegal tips on Google Inc. and Polycom Inc. Those tips and others earned almost $1 million for Whitman’s fund, they said.

Cisco Source?

Defense attorney Dave Anderson spent much of his cross- examination attacking Khan’s credibility and focusing on lies she told officials. Khan was first approached by the Federal Bureau of Investigation in November 2007 and, she said, subsequently met with U.S. investigators at least 40 times.

Khan was asked about her guilty plea to obstruction of justice for destroying e-mails and her failure until 2012 to tell prosecutors about her destruction of some records. She was asked if she had disclosed her conviction when she registered to vote in Florida in 2009 -- she said she didn’t recall if she did -- and she admitted pocketing $15,000 that an accomplice gave her as payment meant for one of her sources.

The defense also focused on an e-mail Khan wrote to Rajaratnam in which she claimed to have a source for leaks about Cisco Systems Inc. Khan said she lied in the e-mail in order to win a job at Galleon. Later, when FBI agents questioned Khan about her claim to have a Cisco source, she said she falsely identified Whitman as her source.

“I don’t know why I was saying that, sir,” Khan told Anderson.

Protect Friends

Khan explained that she lied to protect her friends.

“In the beginning, I was lying about everyone,” she said. “My first instinct was to try to keep out as many people as possible” while focusing investigators solely on Rajaratnam, she said.

On redirect examination by Assistant U.S. Attorney Christopher LaVigne, Khan started crying when the prosecutor asked her about her emotional ordeal. Khan’s testimony will continue tomorrow.

Khan previously testified that she got information about Polycom, the Pleasanton, California-based maker of videoconferencing equipment, from Sunil Bhalla, a friend and senior vice president and general manager of the company’s voice division. Khan said she passed inside information to contacts including Whitman and Rajaratnam and traded on some of them herself.

Evidence Khan provided helped prosecutors get authorization from a judge to wiretap Rajaratnam’s mobile phone. She didn’t testify at Rajaratnam’s insider-trading trial last year. He is serving an 11-year prison sentence.

The case is U.S. v. Whitman, 12-cr-00125, U.S. District Court, Southern District of New York (Manhattan).

To contact the reporters on this story: Bob Van Voris in New York at rvanvoris@bloomberg.net; David Glovin in New York at dglovin@bloomberg.net.

To contact the editor responsible for this story: Michael Hytha at mhytha@bloomberg.net

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