The jury in the insider-trading case of Whitman Capital LLC founder Doug Whitman was told by a key witness, Roomy Khan, that Whitman “aggressively” pressed her to pursue leaks from her sources, whom he referred to as Khan’s “moles.”
Khan, who has pleaded guilty to insider trading, testified for a second day in the trial of Whitman, her former Atherton, California neighbor. Prosecutors say Whitman traded on tips from sources including Khan, who passed him illegal tips on Google Inc. and Polycom Inc., and that he earned almost $1 million.
Khan said she got information about Polycom, the Pleasanton, California-based maker of videoconferencing equipment, from a friend, Sunil Bhalla, a senior vice president and general manager of the company’s voice division.
“He used to be always hounding me,” Khan testified in Manhattan federal court, referring to Whitman. “Call Sunil, call Sunil, call Sunil.” At another point, Whitman told Khan, “What value do you have if you’re not a slime-ball?” she added.
Khan testified for a full day yesterday after spending 40 minutes on the stand the day before. She told jurors she received inside tips from Bhalla and other sources, which she used to make money for herself and passed to friends and business associates, including Galleon Group LLC fund manager Raj Rajaratnam.
Khan, a former Intel Corp. executive, pleaded guilty to passing confidential company information in 2001 and 2009. She played a crucial role in the government’s probe of insider trading at hedge funds. Her evidence helped prosecutors get authorization from a judge to tap Rajaratnam’s mobile phone.
In another case tied to Manhattan U.S. Attorney Preet Bharara’s probe of insider trading, a judge ruled yesterday that Winifred Jiau, a former consultant for Primary Global Research LLC who is serving a four-year prison term, won’t be released while her appeal is pending. Jiau was convicted at a trial last year of passing along earnings and other information about companies including Nvidia Corp. She had asked to be released on bail while her appeal is pending.
Khan told jurors yesterday that she also passed Whitman tips on Google earnings, which she received from Sunil Bhalla, a former employee of Market Street Partners, an investor-relations consulting firm that worked for the search-engine company.
In a telephone conversation with Whitman that Khan taped while she was cooperating with prosecutors, Whitman referred to Khan as “Miss Google.” The recording was played in court.
Khan said Whitman refused to use tips on impending corporate acquisitions she said she got from Deep Shah, a former analyst at Moody’s Investors Service.
‘Go to Jail’
“Mr. Doug Whitman said ‘I don’t want to have anything to do with him,’” Khan testified. “‘I don’t want to go to jail.’”
In Rajaratnam’s trial, prosecutors claimed that in 2007 the hedge fund manager traded on information from Shah, passed to him by Khan, about Blackstone Group LP’s planned takeover of Hilton Hotels Corp.
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. Khan wasn’t called to the stand in Rajaratnam’s trial.
Khan pleaded guilty in 2009 to securities fraud, conspiracy and obstruction of justice. She faces as many as 30 years in prison when she’s sentenced, she told jurors.
In addition to the tips from Khan, prosecutors claim Whitman traded on nonpublic information about Marvell Technology Group Ltd., which makes computer chips. Last week, Karl Motey, an independent consultant hired by Whitman, testified that he passed Whitman inside information from two Marvell employees. Motey has also pleaded guilty and is testifying in hopes of avoiding prison, he told jurors.
Jurors yesterday heard a taped conversation of Whitman and Khan in which Whitman complained that Marvell management had plugged company leaks.
“Marvell had leaks on information like a sieve,” Whitman said on the tape. “They have worked to cut off information.”
Yet, Whitman added, he retained some sources. “I still get some reasonable information,” he said.
At day’s end, defense attorney Dave Anderson spent about 45 minutes questioning Khan about lies she told in a civil lawsuit brought by her housekeeper in 2009.
Khan admitted that she forged a document to defend against claims in the case, lied about it in a deposition, and then filed a false declaration to support the forgery.
“All lies?” Anderson asked her about the declaration.
“Yes,” she said.
Anderson asked about Khan’s leak of Intel documents to Rajaratnam in 1997 and 1998, when she worked for the chipmaker. “I was an overzealous person looking for a job,” she said. “I don’t think I was looking at the morality.”
Anderson asked Khan how she got caught.
“When?” she asked.
Jurors laughed as Anderson clarified that he was talking about the Intel leaks.
The case is U.S. v. Whitman, 12-cr-00125, U.S. District Court, Southern District of New York (Manhattan).