An Intel Corp executive testified that confidential details about a big wireless network transaction were leaked before the announcement of the deal, a key transaction in hedge fund founder's Raj Rajaratnam insider trading case.

Much of Tuesday's testimony in Manhattan federal court focused on Rajiv Goel, a former Intel executive and friend of Rajaratnam's who pleaded guilty to securities fraud and conspiracy in February 2010.

Prosecutors argued that Rajaratnam, who is on trial on charges of trading on illicit stock tips, bought 125,800 Clearwire Corp shares based on inside information.

They contend that his March 24, 2008, purchase came two days before news reports of a possible 4G WiMax venture between Clearwire and Sprint Nextel Corp , including $1 billion of capital from Intel. The venture was announced on May 7, 2008.

In his second day of testimony, Intel Vice President Sriram Viswanathan said Goel would not have been allowed to discuss details of a possible Sprint-Clearwire partnership, including capital commitments from Intel, Comcast Corp and Google Inc.

Viswanathan also said Goel also would not have been authorized to disclose that Intel had held a board meeting on the matter. Those details were disclosed to the jury through phone taps of conversations between Rajaratnam and Goel.

Leaks are fundamentally not productive to any business discussions, because they make the possibility of anything getting done that much riskier, Viswanathan said.

Goel has admitted he tipped Rajaratnam about the Clearwire transaction, and about Intel's quarterly earnings the prior April. He began testifying for the prosecution on Tuesday afternoon.

Rajaratnam, 53, is the most prominent defendant in the largest U.S. hedge fund insider trading case in history. Prosecutors accused him of illegally making $45 million based on tips from corporate insiders.

The one-time billionaire has denied wrongdoing, and said his trades were based on his own research and publicly available information. He faces up to 20 years in prison if convicted of securities fraud.

Twenty-six people have been charged in the probe, and 19, including Goel, have pleaded guilty.

In his testimony, Viswanathan told jurors that Goel would have been spontaneously fired had he been caught leaking material, inside information to Rajaratnam.

You would get fired on the spot, he said.

Viswanathan earlier told defense lawyer Terence Lynam on cross examination that inside information that Intel executives had about the Clearwire-Sprint venture was more reliable than the speculation set forth in analyst research and news reports that Rajaratnam might otherwise have had at the time.

It would be surprising to me for analysts to have concluded at the time that Intel was near a big investment, and not merely committed to WiMax technology, Viswanathan said.

The case is U.S. v Rajaratnam et al, U.S. District Court, Southern District of New York, No. 09-01184.

(Reporting by Jonathan Stempel in New York, editing by Matthew Lewis)

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