Galleon Tipper Goel Tells Jury About Intel Disclosures to ‘Pal’ Rajaratnam
Rajiv Goel, who worked in Intel Corp. (INTC)’s treasury group, told a federal jury how he passed confidential information to his “pal” Raj Rajaratnam, the Galleon Group LLC co-founder on trial for insider trading.
Goel, who is testifying for prosecutors in a bid for leniency after pleading guilty to conspiracy and securities fraud, took the witness stand and said he told Rajaratnam about Intel’s earnings in 2007 and a $1 billion transaction in 2008.
“Raj and I were very good friends,” Goel, 52, testified, as Rajaratnam watched from across the well of the courtroom in lower Manhattan. “He was a good man to me. I was a good pal, a good person to him, so I gave him the information.”
Goel, who was a managing director at Intel, is the second government cooperator to directly implicate Rajaratnam in insider trading. Anil Kumar, a former McKinsey & Co. partner who also pleaded guilty, earlier testified about information he leaked about clients. Other government witnesses have also testified about leaks to Rajaratnam.
Rajaratnam, 53, is on trial in the largest crackdown on hedge-fund insider trading in U.S. history. The Sri Lankan-born money manager is accused of making $45 million from tips leaked by corporate insiders and hedge fund traders.
Rajaratnam says his trades were based on legitimate research, and his lawyers say Goel is accusing Rajaratnam to save himself from a long prison term.
In court today, Goel said he and Rajaratnam became friends at the Wharton School at the University of Pennsylvania, from which they graduated in 1983, and grew close over ensuing years. The families vacationed together, said Goel, a native of Mumbai.
After returning to the U.S. from India and winning 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 Goel needed support for his ailing father, Goel said.
Goel said he and Rajaratnam shared confidences. In 2003, Rajaratnam told Goel that two women who worked in Intel’s sales department had leaked information to him, and Rajaratnam gave each of them a BMW car in return, Goel testified.
‘Gave Them the Keys’
“He gave them the keys,” Goel said.
Goel didn’t identify the two women. Roomy Khan, a former Intel executive and stock trader, has pleaded guilty to insider trading and is cooperating with prosecutors. The other woman hasn’t been identified.
Goel testified that he also asked Rajaratnam for help trading stocks in 2005.
“I told him, ‘You’re a star trader,’” Goel said. “’I don’t know how to trade stocks. Can you help me? Can you help me make some money?”
Rajaratnam or an aide traded in Goel’s account with Charles Schwab Corp. (SCHW) from 2005 to 2009 and earned $700,000 to $800,000 for his friend, Goel said. Prosecutors highlighted several trades in the account that witnesses have said were based on inside information.
One set of trades involved At Road Inc., which generated a profit for Goel of about $19,700, he testified. Assistant U.S. Attorney Reed Brodsky asked Goel whether Rajaratnam talked about the trade.
At Road CEO
“He said he knew the CEO at At Road and there was going to be an acquisition,” Goel testified.
At Road was acquired months later by Trimble Navigation Ltd. Goel said the chief executive officer of At Road was Krish Panu, who also has served as a managing partner at Galleon.
Prosecutors previously claimed Panu gave Rajaratnam secret information about PeopleSupport Inc., on whose board he sat.
Goel said he first leaked Intel’s financial data to Rajaratnam in March and April 2007, before the company announced first-quarter earnings. By that point, Rajaratnam’s questions to Goel had evolved from generalities about Silicon Valley to specifics about Intel’s earnings, gross margins and factory capacity, Goel said.
Goel said he learned information about Intel’s earnings from Alex Lenke, an investor-relations official at the Santa Clara, California-based chipmaker. Lenke, who earlier testified at the trial, also gave Goel periodic updates on the financial data, Goel said.
The updated financial information made Goel “nervous,” he said.
“I considered Raj to be a close friend,” Goel testified. “I was afraid that if it turned out to be wrong, it would have a bearing on the friendship.”
Goel said he eventually tracked Rajaratnam down “somewhere in the Caribbean islands” and told him about the updates.
Among the evidence prosecutors introduced was a Nov. 28, 2006, e-mail from Goel to Rajaratnam in which Goel said he would soon be in Manhattan and wanted to meet.
In the e-mail, Goel also asked Rajaratnam if he could introduce him to “Milken.”
“If you have any connection in to Milken, I would truly appreciate that,” Goel wrote.
Prosecutors didn’t ask Goel to identify the person or provide more detail.
Prosecutors tomorrow will question Goel about his alleged tip to Rajaratnam about Intel’s $1 billion investment in a new wireless network company formed by Clearwire Corp. and Sprint Nextel Corp.
The case is U.S. v. Rajaratnam, 1:09-cr-01184, U.S. District Court, Southern District of New York (Manhattan).
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