Rajaratnam tapes played for jurors in N.Y. court
Jurors for the first time heard the voices of accused hedge fund manager Raj Rajaratnam and some of his high-placed friends discussing stocks in wiretapped conversations that authorities argue show he traded illegally on company secrets.
At the start of testimony in Manhattan federal court, U.S. prosecutors played digital recordings of the Galleon Group founder's mobile phone calls that were gathered by the FBI. Rajaratnam, 53, is heard speaking rapidly in a high-pitched voice, rattling off numbers and acronyms for companies.
The Sri Lankan-born, one-time billionaire is accused of creating a network of tipsters who fed him inside information that gave him an unfair advantage over other stock traders. His trial is the signature case in an insider trading probe that has shaken the secretive $1.9 trillion hedge fund industry.
The jury heard an October 2008 phone call in which Rajaratnam spoke with former Intel executive Rajiv Goel, who has pleaded guilty and agreed to testify for the government. Prosecutors say Rajaratnam placed trades on behalf of Goel in a brokerage account, based on information Rajaratnam obtained from a PeopleSupport board member.
And I know the deal's gonna get done at $12.25 which is three bucks above, right? Rajaratnam is heard asking. Goel replies: Right.
Then Rajaratnam can be heard saying: We know because one of our guys is on the board. We know they are gonna put $41 million in escrow. It's a $250 million deal.
Rajaratnam is alleged to have conspired with PeopleSupport board member Krish Panu to get inside details about Essar/Aegis's acquisition of the company in August 2008 and the closing of the deal that October. Panu has not been charged in the case.
Rajaratnam's lawyers failed last year to suppress the FBI recordings. The case stands apart from past insider trading probes because of the broad use of wiretaps, tactics traditionally used to crack down on organized crime groups.
FBI special agent Diane Wehner was the first witness. She described the telephone surveillance of Rajaratnam and others, saying she became familiar with Rajaratnam's voice through multiple overhears during eight or nine months the wiretap was up in 2008.
On cross-examination, defense lawyers on Thursday argued that Rajaratnam relied on public information and expert analysis and did not break insider trading laws.
Defense lawyer Terence Lynam asked Wehner: You did not know if what Mr. Rajaratnam was talking about ... was learned through the stock research that Galleon did, correct?
Wehner responded: Correct.
In another call from May 2008, and played for the 12 jurors, Rajaratnam is heard talking with one-time employee Adam Smith.
Rajaratnam asks Smith how the market is treating him and Smith answers: Like a baby treats a diaper. Rajaratnam giggles and the pair goes on to discuss Vishay Intertechnology Inc, a company prosecutors cited in charges against both men.
The government contends that Smith and Rajaratnam conspired to obtain secret information about a potential acquisition of Vishay. As it turned out, Vishay was never acquired.
Former McKinsey & Co consulting firm executive Anil Kumar is expected to take the stand later on Thursday as a key witness for the government. In the morning, prosecutors played a recording of a conversation between him and Rajaratnam. Kumar pleaded guilty to conspiracy and fraud charges last year.
Hi. So yesterday they agreed on, at least they've shaken hands and they've said they are going ahead with the deal, Kumar is heard saying in an August 15, 2008, phone call.
Rajaratnam responds with: Uh huh. Kumar is then heard saying, there will be such a boost from this announcement, it'll be fine.
To which Rajaratnam can be heard saying, Right. What's the deal? How much are they investing?
Prosecutors contend that Rajaratnam and Kumar were discussing a deal by chipmaker Advanced Micro Devices with Mubadala, an Abu Dhabi government investment fund. Mubadala currently has a stake in AMD.
The case is USA v Raj Rajaratnam et al, U.S. District Court for the Southern District of New York, No. 09-01184.
(Additional reporting by Basil Katz; editing by John Wallace and Maureen Bavdek)
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