Rajaratnam Friend Says He Didn’t Exect Tips to Be Shared

Rajiv Goel, a former Intel Corp. (INTC) executive who testified against Galleon Group LLC co-founder Raj Rajaratnam, returned to court in a trial against the fund manager’s younger brother and told jurors he didn’t expect the siblings to swap secrets.

Goel cooperated with prosecutors and said at Raj Rajaratnam’s 2011 insider-trading trial that he gave Intel tips to the Galleon co-founder. Today, he made an encore appearance in Manhattan federal court and gave evidence against Rengan Rajaratnam, an ex-Galleon trader who the U.S. says earned at least $800,000 from leaks passed along from his older brother.

The defense argues that Rengan Rajaratnam didn’t know that information from Raj Rajaratnam came from an illicit source like Goel. To establish that, defense attorney Daniel Gitner asked Goel during cross-examination whether he knew that Raj Rajaratnam was passing to Rengan tips about Intel’s investment in a wireless network company.

“The only person you improperly shared confidential information with was Raj Rajaratnam?” Gitner asked.

“Yeah, that would be accurate,” Goel said.

“And you did not expect at that time that Raj was telling anyone that you shared confidential information with him?” Gitner asked.

“That is correct,” Goel said.

Cooperation, Probation

After cooperating with prosecutors, Goel was sentenced to two years’ probation. He now lives in India. Raj Rajaratnam, 57, is serving 11 years in a federal prison in Massachusetts. Rengan Rajaratnam, 43, denies wrongdoing.

Rengan Rajaratnam is charged with illegal trades in Clearwire Corp. and Advanced Micro Devices Inc. in 2008. The most serious charge of securities fraud carries a 20-year maximum prison term.

On direct examination today, Goel told jurors that he and Raj Rajaratnam were friends for more than 25 years after meeting at the Wharton School of the University of Pennsylvania. He said he didn’t meet Rengan until a June 2008 group vacation.

Goel said he and Raj Rajaratnam were “very good friends” and that Raj, a billionaire, loaned him $100,000 to buy a home in 2005 and $500,000 more the next year when Goel needed to support his ailing father. Raj Rajaratnam made about $700,000 by trading in a brokerage account on his behalf, Goel testified.

Telephone Calls

Jurors today also heard telephone calls between Goel and Raj Rajaratnam that were secretly recorded by the Federal Bureau of Investigation in 2008. On them, Goel told Rajaratnam about Intel’s plan to invest $1 billion in a high-speed Internet business, the members of the new company’s board and the range in which the stock would be valued.

The deal was publicly announced on May 7, 2008.

“Yesterday our board approved this deal,” Goel told Rajaratnam on March 20, 2008, according to a recording. “Let me tell you what the board is going to do,” Goel said on another call that day.

Assistant U.S. Attorney Christopher Frey asked Goel why Raj Rajaratnam was seeking the information.

“So he could come up with some kind of share price,” Goel said. “He must’ve wanted to trade on it.”

The case is U.S. v. Rajaratnam, 13-cr-00211, U.S. District Court, Southern District of New York (Manhattan).

To contact the reporter on this story: Patricia Hurtado in New York at pathurtado@bloomberg.net

To contact the editors responsible for this story: Michael Hytha at mhytha@bloomberg.net David Glovin, Andrew Dunn

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