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| Raj Rajaratnam |
The blockbuster trial of Raj Rajaratnam is spawning news stories on several fronts. Here is a summary of Monday’s action.
Kumar to Face Cross Examination
As we reported on Friday, Anil Kumar, once a director at McKinsey & Company, testified how he had illegally collected almost $3 million to furnish Rajaratnam with insider information. Advanced Micro Devices (AMD) is one of the McKinsey clients betrayed by Kumar, as evidenced by wiretapped tapes presented to the jury.
Kumar is expected to reveal tips related to other clients, including Business Objects SA, Cisco Systems, EBay Inc., Samsung Electronics and Spansion Inc. Then, the defense attorneys get their shot trying to prove to what they pray is a gullible jury that the payments were honest, even though Kumar shielded them from the Internal Revenue Service.
Gupta Tried to Join KKR
Rajat Gupta, another tipster from McKinsey (and oh yes, its chief) wanted to leave the board of Goldman Sachs behind to join Kohlberg Kravis Roberts just prior to passing confidential information about Goldman to Rajaratnam. One tape has Rajaratnam commiserating with Anil Kumar about Gupta’s situation at Goldman. One month later, Gupta was passing secrets about Berkshire Hathaway’s cash infusion into Goldman. Gupta has tried to resign from the board a week earlier, but was rebuffed by CEO Lloyd Blankfein and others.
Although Gupta gave his longstanding friendship with KKR founder Henry Kravis as the reason to depart, the wiretap has Kumar revealing the real reason – Gupta knew of the conflict of interest. Gupta took the post, but resigned earlier this month.
"At some point, what I worry about is that there can be this massive implosion in him," Kumar said."He didn't seem comfortable," Rajaratnam offered. "He seemed like he was tormented."
Prosecutors Release Three Tapes
Three wiretaps played for the jury last week were released by prosecutors in the Raj Rajaratnam trial. Intel employee Rajiv Goel is heard in one listening to Rajaratnam saying he bought a large position in PeopleSoft. Rajaratnam apparently bought the position through Goel’s brokerage account. The conversation continued:
"I can't buy anymore" and "we know because one of our guys is on the board that they are going to put $41 million in escrow."
Rajaratnam knew that the acquisition would exceed current prices by $3.
The second tape, Rajaratnam is overheard speaking with Galleon traders Ian Horowitz and Adam Smith discussing a deal with Vishay Intertechnology. The final tape has Anil Kumar discussing the AMD deal with Rajaratnam. This tape contains the conversations about Rajat Gupta mentioned above.
Former Rajaratnam Employee Added to Witness List
Robert Harrington is one confused dude. To hear him tell it, he has no idea why he was included in the prosecution’s list of 112 potential witnesses. Harrington currently is employed by Geneva-based Jabre Capital partners, a hedge fund. "No one from any organization or entity has contacted me about this issue," he revealed to MarketWatch.
Neither the prosecution nor the defense had any comment. Harrington’s boss, Philippe Riachi, was also in the dark: "We have not had any regulator conduct an investigation," he said. Harrington ceased to work at Galleon in 2007, just as Jabre was starting up.
