Indian American executive tipped Rajaratnam for 5 years

March 15th, 2011 - 10:55 am ICT by IANS  

New York, March 15 (IANS) Anil Kumar, a former Indian American McKinsey & Co executive, has testified that he secretly provided billionaire hedge fund tycoon Raj Rajaratnam with inside information about upcoming deals from 2004 to 2009.

Appearing before a New York court in the biggest insider trading case for the second day Monday, Kumar said he told Rajaratnam about Advanced Micro Devices (AMD) plans in 2008 to spin off a manufacturing entity for its microchips investments from sovereign wealth companies.

But Sri Lankan born Galleon Group founder Rajaratnam warned him his information was no longer as useful because of Danielle Chiesi, a stock trader, who had an “intimate relationship” with AMD CEO Hector Ruiz.

“He said there was someone on Wall Street that had an intimate relationship with my client, AMD, who was able to provide more information than I was,” Kumar testified. He later identified the individual as Chiesi.

Kumar told the court that Rajaratnam, 53, warned him that Chiesi was also passing tips to others on Wall Street about the proposed deal.

“He said she talks to a lot of people and people get to know about it and therefore it’s no longer private,” Kumar said. Rajaratnam suggested he warn Ruiz, “Stop doing this.”

Chiesi, a trader at New Castle Funds LLC, pleaded guilty in January. Prosecutors said she traded on leaks from Robert Moffat, a former International Business Machines (IBM) senior vice president, who also pleaded guilty.

Prosecution Monday also played several conversations between Chiesi and Rajaratnam, who is accused of making $45 million from confidential information leaked by corporate insiders and hedge fund traders.

Chiesi, who opened her call with, “Hey, baby” and closed it with “I love you”, asked Rajaratnam whether she should trade on the AMD tip.

“I know everybody’s being investigated, do you think I could buy it here honestly?” she said.

At another point, she told Rajaratnam that Moffat is “more like a geeky type” and “He’s not charismatic like you are”.

The prosecution also showed the jury a series of internal McKinsey e-mails from 2005 and 2006 about a project alternately named “Project SuperNova” and “Go Big” - the code names for AMD’s planned acquisition of ATI. Kumar said he regularly posted Rajaratnam on the deal’s progress.

On the day AMD announced its acquisition of ATI in July 2006, Kumar said he received a congratulatory call from Rajaratnam. Kumar said that Rajaratnam told him, “that was fantastic. We’re all cheering you at the office right now. You’re a star. You’re a hero.”

In December, Rajaratnam gave Kumar another call. He said that Galleon had a great year and big bonuses were being paid. “I want to give you $1 million,” Rajaratnam said. “Tell me where to send it.”

“I almost fell off my chair,” said Kumar, who had the money wired to a bank account in India.

Prosecutors Monday also played a tape of an April 22, 2008, conversation between Rajaratnam and his friend Krish Panu, a Galleon managing director.

Rajaratnam called Panu after being told by Kumar about a transaction involving Spansion Inc and told him: “Yeah, we just have an e-mail trail.”

(Arun Kumar can be contacted at arun.kumar@ians.in)

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