Rajiv Goel, a former Wharton classmate and friend of Raj Rajaratnam who testified against the fund manager at his insider-trading trial, is due to learn whether he’ll be imprisoned or spared like other cooperators.
U.S. District Judge Barbara Jones in Manhattan opened a hearing today on the sentencing of Goel, 54, in a case that is part of the largest crackdown on insider trading at hedge funds. The government and Goel’s lawyer described in court filings his assistance in the prosecution of Rajaratnam, the Galleon Group LLC co-founder who was convicted last year by a jury and is serving an 11-year prison term.
“Goel substantially helped the government secure a conviction in one of the most significant and high-profile insider-trading cases in U.S. history,” Assistant U.S. Attorney Reed Brodsky said in a memo this month to Jones.
Goel, a former Intel Corp. (INTC) treasury group managing director who was arrested with Rajaratnam in October 2009, pleaded guilty in February 2010 to conspiracy and securities fraud. Goel testified over four days at Rajaratnam’s trial about their 25- year friendship, which began when they attended the Wharton School of the University of Pennsylvania. He said he conspired with Rajaratnam from 2007 to 2009 and passed him illegal tips about Intel.
Goel even provided the government with information about secret Swiss bank accounts that prosecutors used at trial. That information would have been impossible to obtain with Goel because of secrecy laws in Switzerland, prosecutors said.
“Goel testified against one of his closest friends who had provided him with substantial financial assistance over many years,” Brodsky wrote. “Although Goel did not express it or complain about it, he had to overcome the emotional aspect of providing assistance and trial testimony that helped demonstrate his close friend was guilty of multiple counts of securities fraud.”
Goel faces as long as 25 years in prison. Two other government witnesses who testified against Rajaratnam were spared prison terms by federal judges in Manhattan.
Anil Kumar, the former McKinsey & Co. partner who was another Rajaratnam classmate and friend from Wharton, also faced a possible 25-year prison term. U.S. Circuit Judge Denny Chin sentenced Kumar in July to two years’ probation, citing his “extraordinary” cooperation.
Adam Smith, a former Galleon portfolio manager who worked for Rajaratnam and testified at his trial, also received a term of two years’ probation.
Another former Galleon trader, David Slaine, who wore a wire to record dozens of conversations with insider-trading suspects, also was rewarded for his cooperation, though he didn’t testify at Rajaratnam’s trial. Slaine, who was called to testify against fellow Galleon trader Zvi Goffer, was given three years’ probation.
Goel’s lawyer, David Zornow, urged Jones to impose a term of probation, saying Goel’s reputation was ruined as a result of his involvement in the case and that he has been unable to find work since he lost his job at Intel after his 2009 arrest.
“Goel was not even close to Rajaratnam’s criminal league,” and was instead “corrupted and manipulated” by the fund manager into committing crimes in part because of “a weakness for getting drawn into long conversations,” Zornow said in his memo to the court.
The defense attorney also said Goel “had lived a life free of crime until he started providing Rajaratnam with inside information.”
Goel agreed to pay the U.S. Securities and Exchange Commission more than $254,000 to settle a civil lawsuit in which Galleon and Rajaratnam were among the defendants.
Goel, who worked at Intel’s treasury group, testified he told Rajaratnam about Intel’s earnings in 2007 and about a $1 billion transaction in 2008.
He told jurors that his friendship with Rajaratnam grew closer in the years after they graduated from the Wharton business school in 1983. The families vacationed together, said Goel, a native of Mumbai.
After returning to the U.S. from India and landing a job at Intel in 2000, Goel said, he repeatedly turned to Rajaratnam for financial assistance. Rajaratnam loaned Goel $100,000 to buy a home in 2005 and another $500,000 the next year when he needed support for his ailing father, Goel said.
Goel put the $500,000 in a Swiss bank and used a portion to fix his California home. He testified that he didn’t report the gift to the Internal Revenue Service.
The case is U.S. v. Goel, 1:10-cr-00090, U.S. District Court, Southern District of New York (Manhattan).
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